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President Trump issues Executive Order adopting Most Favored Nation Approach

December 2, 2020 | No Comments
Posted by Frank Ciesla

In what appears to be one of President Trump’s last official acts, he has issued an Executive Order adopting, for certain purposes, the Most Favored Nation clause approach to the pricing of drugs in the United States.  During the campaign, it was the position of President-Elect Biden that we should be negotiating the price with the drug companies for the sale of drugs in the United States.

Obviously, an Executive Order by one President can be quickly replaced with an Executive Order by the next President.

The only approach in regard to institutionalizing the Most Favored Nation clause approach to drug pricing, would be Congressional legislation, which has not been forthcoming during the four years of the Trump Administration.

A recent development is the decision of the Canadian government to enact significant restrictions on the bulk purchase of drugs in Canada for shipment into the United States.  This is most likely the result of pressure by the drug companies, who have made it clear to the Canadians that the drug companies will only provide Canada with a certain quantity of drug products at particular pricing levels and at quantities which are sufficient for the Canadian population alone.  The drug companies will not permit the Canadians to sell drugs that had been purchased at the much cheaper Canadian price than the price for which those drugs are sold in the United States to institutions in the United States.

This action of the Canadians highlights that the approach of the Most Favored Nation clause would not be greeted in a friendly manner, by many of our allies.  These allies benefit from being able to negotiate cheaper prices for drugs, since the drug companies can then make up the shortfall needed for their R&D or their profit, by charging much higher prices for drugs in the United States.  Enacting a Most Favored Nation clause would shut down that option, on behalf of the drug companies, and they would be forced to negotiate with our allies at much higher prices for drugs sold to the allies.  Of course, this would stop the cost shifting to the American consumers and spread the cost of the development of drugs among all users, including those of our allies.

It will be interesting to see what approach the Biden Administration takes in regard to the pricing of drugs and whether or not it will continue the Trump approach of Most Favored Nation or will attempt to develop a different negotiating strategy for the pricing of drugs.

 

 

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