Importing Foreign Drug Prices Will Not Help Americans

In May, President Donald Trump signed an executive order that aims to push drug companies to sell their products at a “most-favored nation” price—meaning the lowest price found in other developed nations. This won’t have the beneficial effect on domestic prices the president intends. Importing foreign nations’ drug prices will lead to endless price gaming by drug companies. Further, the low prices in these countries are largely the result of centralized or nationalized health-care systems that America should not imitate.

The only real way to drive down drug prices is to strengthen competition. Trump can help do this in several ways—some already tried out in his first term.

First, the Food and Drug Administration can accelerate approval of competing drugs. In Trump’s first term, the FDA made an unprecedented push to approve generic competitors for brand-name drugs. It set a record, permitting more than 3,000 drugs in that period, among them notable approvals like the first generic EpiPen. Some estimate that these permits saved consumers tens of billions of dollars.

Trump’s new FDA commissioner, Marty Makary, has said that he also wants to speed up drug approvals, including generics. But the approval rate for novel drugs this year is down, even relative to Biden’s term, let alone Trump’s first one. Fast-tracking approvals would be the single best way to enhance the kind of competition that keeps prices low.

Another way to reduce prices is to ease drug imports into the U.S. By one estimate, more than two-thirds of the top brand-name drugs sold here are imported. Over 80 percent of generics are also imported—and generics, thanks in part to Trump’s first-term efforts, account for 90 percent of all prescriptions.

Even so, the president has said that imported pharmaceuticals could face tariffs as high as 250 percent. Some recent trade deals have already pushed tariffs on pills into the double digits. Former Trump FDA commissioner Scott Gottlieb has warned that such measures will either raise prices or stall drug production.

Trump’s executive order does call for improving Americans’ ability “to import prescription drugs.” But if Trump wants more of any type of drug imports, tariff rates need to remain reasonable and access to foreign suppliers must expand.

The U.S. should also consider importing foreign drug approvals. The FDA and its transatlantic counterpart, the European Medicines Agency, already agree on drug safety and efficacy in the vast majority of cases. From 2014 to 2016, one study found, the two agencies agreed 90 percent of the time on new approvals. In all eight cases where the FDA initially withheld approval for a drug cleared in Europe, it eventually reversed course. A study covering the next four years found agreement in 95 percent of cases.

In other words, EMA approval is a good indicator for FDA approval. Drugs that have passed the EMA’s rigorous process but not yet America’s should be presumed safe here and granted some sort of accelerated approval pathway.

Greater competition in the ways Americans can buy drugs could also cut prices. Trump’s executive order mentions that “direct-to-consumer sales” could help. Pharmaceutical companies have already been increasing direct sales outside of insurers and Pharmacy Benefits Managers, which typically manage drug sales. Cutting out middlemen can reduce prices, especially for those of limited means. If Trump can expand direct access without imposing price mandates, it would be a boon for both producers and consumers.

High drug prices remain one of the most common complaints about America’s health-care system. Some of these criticisms stem from the inherent costs of innovation and America’s role as a leader in drug development. Others reflect legitimate frustration at how certain companies have stymied competition. The surest path to lower costs is to unleash competition.

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