Trump's 'big announcement' is Medicare drug price plan: Politico

Trump's 'big announcement' is Medicare drug price plan: Politico

President Donald J. Trump's administration has proposed a significant shift in Medicare drug pricing, aiming to reduce costs through a "most favored nation" (MFN) model. This approach, if implemented, would tie Medicare drug prices to the lowest prices paid in other developed countries, a move that has sparked debate among health policy experts and economists.

Under the proposed MFN model, Medicare would receive drug prices equal to the lowest prices paid in countries like France, Germany, or the United Kingdom. These countries use government-dictated prices, often under threat of coercion or market exclusion. Critics argue that this is a form of price fixing rather than market reform, and it could have unintended consequences on drug innovation and access to healthcare.

Health policy expert Sally Pipes, writing in Forbes, asserts that Medicaid already imposes price controls through its "Best Price" rule, which requires manufacturers to offer Medicaid the lowest price they give to any other buyer, plus steep, mandatory rebates. This results in average discounts exceeding 50% for many drugs. Pipes warns that adopting the MFN model would exacerbate the problem, potentially forcing companies to stop offering their drugs in Medicaid entirely, thereby sabotaging both Medicaid and Medicare [1].

Moreover, the MFN model could stifle innovation. The Congressional Budget Office has noted that drug companies' R&D budgets are determined by expected returns. By slashing these returns, the MFN model would decimate R&D spending, leading to fewer new cures and treatments. This is particularly concerning given that over two-thirds of new medicines are developed in the United States [1].

The Trump administration's push for the MFN model is part of a broader effort to privatize Medicare. The Centers for Medicare & Medicaid Services (CMS) Innovation Center has been ordered to draw up plans for making Medicare Advantage (MA) the default for all Medicare enrollees, regardless of their preferences. This move is consistent with Trump's support for privatized Medicare and could lead to increased costs for taxpayers and reduced access to healthcare for seniors [2].

Critics argue that defaulting Medicare enrollees into MA plans would undermine their choice and could push them into plans with burdensome prior authorization requirements and limited networks. Traditional Medicare offers access to nearly any provider in the country with minimal interference, while MA enrollees often face more stringent requirements and limited networks. This could lead to worse healthcare outcomes for beneficiaries [2].

In conclusion, Trump's proposed Medicare drug pricing plan and efforts to privatize Medicare are controversial and could have significant impacts on healthcare costs, innovation, and access to care. It is crucial for Congress to carefully consider these proposals and ensure that they do not undermine the principles of free markets and patient choice.

References:
[1] https://www.forbes.com/sites/sallypipes/2025/05/03/medicaid-is-not-a-test-lab-for-foreign-price-controls/
[2] https://www.yahoo.com/news/trump-could-saddle-seniors-costly-223500800.html