COMMENTARY: The real story behind Trump’s GLP-1 price cut: Markets still rule

President Donald Trump just announced deals with drugmakers Eli Lilly and Novo Nordisk that will yield lower prices for GLP-1 weight-loss drugs dispensed through Medicare and Medicaid. Both firms have also agreed to sell the drugs at lower prices on Trump’s yet-to-be-developed online marketplace for prescription drugs, TrumpRx.

Lilly and Novo join Pfizer and AstraZeneca in striking agreements with the administration to lower the prices of at least some of their drugs. The president has framed these deals as vindications of his “Most Favored Nation” executive order, which envisions requiring drug companies to offer Americans the best price they offer residents of other developed nations.

But it’s important to note that the deals were voluntary. Enshrining most-favored-nation pricing into law would be tantamount to importing foreign countries’ price controls on prescription drugs. And that would have a devastating impact on medical innovation.

Let’s first consider some of the details surrounding the deals. Lilly and Novo agreed to them in large part because they received significant benefits in return. Historically, Medicare has been barred from covering drugs indicated for weight loss. That’s changed under the deal. In exchange for lowering their prices, the two drug makers will gain access to the huge market of beneficiaries with obesity.

Further, the Pfizer and AstraZeneca deals provide most-favored-nation pricing to Medicaid, not Medicare or commercial plans. Drug companies are already required to sell their medicines to Medicaid at roughly 23 cents on the dollar. So the difference between the deals Trump has announced and the status quo is minimal.

The Trump administration’s desire to narrow the gap between what Americans pay for drugs and what their peers abroad pay is understandable. No one likes to be treated unfairly. But the price controls that foreign countries levy on drugs carry a significant trade-off — reduced access to innovative medicines.

Foreign health care systems don’t tend to pay for new treatments. In the United Kingdom, for example, the public health insurance system reimburses for just 43 percent of innovative medicines. In Australia, it’s just 25 percent.

Other countries simply don’t value their denizens’ lives at the same level the United States does. Britain, for example, uses a metric called the quality-adjusted life year to determine whether a drug is worth covering. A QALY is the value of one additional year of disability-free life, more or less. That’s worth between $27,000 and $40,000 in Britain. In the United States, QALYs are generally valued four times those figures — or more.

Most-favored-nation policies can’t deliver savings to Americans if the drug is not even available abroad.

More than half of all new drugs launch first in the United States. American patients gain access to new drugs a year earlier than their peers in Europe, Japan or Australia.

If the United States adopts foreign pricing schemes, new drugs will be much less likely to launch here. And American patients will wait.

Revenue from the U.S. market funds the vast majority of global drug research and development. Applying most-favored-nation pricing to Medicare and Medicaid would reduce R&D spending by 48 percent. And that would result in 500 fewer new treatments being developed — and some 6.6 million lives being lost — over a decade, according to a September paper published by four economists from the University of Chicago.

Price controls sap resources and ingenuity from America’s pharmaceutical sector — and deprive American patients of the next generation of life-saving medicines. For the past several decades, America has been the world’s medicine chest. We should keep it that way.

Sally C. Pipes is president, CEO and Thomas W. Smith fellow in health care policy at the Pacific Research Institute. Follow on X @sallypipes.