We wrote about the announced Trump EO on prescription drugs when it was announced and before it was released, and we assumed it would be the same as a similar order in the first Administration ordering Medicare to apply Most-Favored Nation status to drug purchases. The actually-released EO is very different, as Cato's excellent health care analyst Michael F. Cannon details.

It's not an attempt to get the government to spend less on drugs. It's an attempt to implement economy-wide price controls.

Cannon:

"Today, President Trump ordered the Department of Health and Human Services to 'communicate…price targets to pharmaceutical manufacturers.' Trump does not in any way suggest those price targets would apply only to the prices the government pays for medicines.

If HHS determines that pharmaceutical manufacturers have failed to make “significant progress” (whatever that means) toward those targets, things get ugly. In that event, Trump commands:

HHS shall 'to the extent consistent with law…impose most-favored-nation pricing.'

The Department of Justice and the Federal Trade Commission 'shall…undertake enforcement action against any anti-competitive practices.'

The Commerce Department and other agencies 'shall…consider all necessary action regarding the export of pharmaceutical drugs or precursor material.'

The Food and Drug Administration shall 'review and potentially modify or revoke approvals granted for drugs.'

All federal agencies shall 'take all action available…to address global freeloading and price discrimination against American patients.'

Trump’s executive order is a laundry list of coercive actions he plans to take against drug companies that do not make 'significant progress' toward his 'price targets.'"

This is very concerning. Actual price controls are very bad. More.

Meanwhile, here's a study from Ashvin Gandhi at UCLA and NBER on this very topic. The tl;dr is that the impact of these MFN-type policies is usually to raise prices in other countries rather than reduce them in the US. Not encouraging on that front either.

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