The news: President Trump sent letters to 17 pharma companies, demanding they take action to lower drug prices in the US within 60 days.

Catch up quick: Trump intensified his May “most-favored nation” executive order that tasked pharma companies with equalizing how much America and other developed countries pay for prescription drugs. Brand-name drugs on average are priced more than four times higher in the US than in similar nations, per RAND research. Trump gave drugmakers a month to come up with pricing targets in that order.

Predictably, Pharma companies didn’t voluntarily lower their drug prices as a result of the order. Trump, in a Truth Social post, said most proposals his administration received shifted blame to others while “requesting policy changes that would result in billions of handouts to industry.”

Trump’s new demands: He’s now commanding the 17 drugmakers to:

• Provide their full portfolio of existing medications at prices in line with what other developed nations pay for Medicaid patients.
• Guarantee that all new drugs will be priced at most-favored nation rates for Medicare, Medicaid, and commercial health plans.
• Negotiate harder with “foreign freeloader nations,” which will be supported by US trade policy. But increased revenues earned abroad must be repatriated.
• Establish direct-to-consumer distribution models for “high-volume, high rebate” drugs.

Trump did not specify how he would enforce his demands. But he added that if drugmakers “refuse to step up” in 60 days, the government “will deploy every tool in our arsenal to protect American families from continued abusive drug pricing practices.”

Pharma’s reaction: Drugmakers' biggest trade group in the US, PhRMA, blamed middlemen like PBMs and health insurers in a statement. It also said that foreign countries should pay their fair share rather than pharma companies lowering US prices.

More pharma companies have leaned into D2C pricing, however. Allowing consumers to purchase medications directly from the manufacturer would hurt pharma’s middlemen more than the drugmakers since there wouldn’t be fees and rebates typically collected by PBMs.

• Roche (not one of the 17 on Trump’s list) said on its Q2 earnings call that it’s considering a D2C sales channel for its prescription drugs.
• Pfizer and Bristol Myers Squibb will launch an online D2C channel in September for cash-pay patients on its blood thinner Elquis.
• Pfizer, Eli Lilly, and Novo Nordisk have each rolled out D2C platforms where cash-pay consumers with a prescription can directly purchase some of the manufacturers’ drugs.

Our take: We think it’s unrealistic to expect pharma companies to willingly cut their profits despite Trump’s escalated demands. Drugmakers called out in the letter will likely wait out Trump’s deadline and see what he threatens next, knowing they could always legally challenge the most-favored nation order.

We also expect more pharma companies to make some of their medicines available through the D2C channel, perhaps seeing it as a reasonable good-faith concession that they hope will get Trump to back off most-favored nation pricing.

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