Drug prices just recorded their sharpest annual decline in more than 60 years. Now the president must expand that health care cost savings success- and quickly.
Americans have finally received some unambiguously good news about affordability. Prescription-drug prices fell 3.1% during the 12 months ending in July, the largest annual decline since 1963. The broader category of medicinal drugs, including over-the-counter medicines, fell 2.7%.
That is not merely a slower rate of inflation. Prices actually declined while the overall cost of living rose 3.4%.
President Trump is understandably taking credit. His most-favored-nation agreements with pharmaceutical manufacturers, the launch of TrumpRx and growing discounts on expensive medications are beginning to change a system in which Americans routinely paid far more than patients in other wealthy countries.
Still, a full explanation of this success crosses presidential administrations.
Trump’s first administration accelerated generic-drug approvals, attacked regulatory obstacles protecting expensive brand-name medicines and established the first large-scale Medicare program offering insulin for no more than $35 a month. Some of his more ambitious ideas, including an early most-favored-nation rule, were blocked or never implemented. But the administration demonstrated that competition and targeted negotiations could produce lower prices.
President Biden subsequently signed the Inflation Reduction Act. Its health provisions expanded Trump’s insulin experiment into a mandatory Medicare benefit, capped annual Part D expenses and authorized Medicare to negotiate prices for an initial group of expensive drugs. The first ten negotiated prices took effect in January.
Biden deserves credit for signing that legislation. But, the Medicare program initially covers only ten drugs, while the federal price index includes thousands of prescriptions purchased through Medicare, private insurance and cash. Generic competition, commercial discounts and Trump’s newer manufacturer agreements are also contributing.
Nor did Trump repeal Biden’s program simply because Democrats created it. His administration implemented the first negotiated prices, conducted the next round of negotiations and added new mechanisms of its own.
This is how government ought to work more often. One administration built upon another administration’s experiment. A succeeding president kept the useful machinery, discarded what he disliked and added his own approach. Policies quietly accumulated until Americans obtained a measurable result.
The objective was achieved because lowering drug prices became a policy goal rather than merely a political goal.
Naturally, it has now become political — and Trump would be foolish not to make use of it.
Affordability is likely to be the central issue of the midterm campaign. The productive economy may be relatively strong, but the household economy remains strained. Families encounter inflation through grocery receipts, utility bills, insurance renewals, rent, mortgage payments and medical bills. Voters rarely comfort themselves with favorable macroeconomic statistics while paying $200 for a prescription.
The president cannot personally reduce every household expense. He cannot order oil markets, local property taxes, rents or grocery prices to obey the electoral calendar. But he has considerable authority over federal health programs, and health care provides him an opportunity to demonstrate movement before November.
The most immediate step is to expand Trump’s most-favored-nation agreements. More manufacturers and medicines should be added to TrumpRx, and discounts should reach beyond cash-paying consumers. Americans should not be expected to finance the world’s pharmaceutical research while wealthy European countries demand lower prices for the same products.
Trump should also continue Medicare negotiations while improving them. His administration has already negotiated prices for 15 additional drugs taking effect in 2027. It should use Medicare’s enormous purchasing power against other high-cost medicines, including cancer therapies, biologics and physician-administered drugs that fall outside the existing program.
The next great opportunity may be hospitals. The same infusion, scan or routine visit can cost much more when performed in a facility owned by a hospital system. Medicare should move more aggressively toward site-neutral payments: the same payment for the same service, regardless of whose name is on the building.
That reform would reduce incentives for hospitals to purchase independent medical practices simply to bill at higher rates. It could also reduce patients’ coinsurance. Hospitals will object that they have higher overhead and emergency-care obligations, and rural facilities may need special protection. Those concerns can be accommodated without preserving every inflated facility fee.
The administration should also enforce real price transparency. Trump’s first-term rules forced hospitals and insurers to begin publishing negotiated prices, but the information was often incomplete, inaccessible or incomprehensible. Patients need an actual price before treatment — not a gigantic data file requiring a software engineer to interpret.
Pharmacy-benefit managers deserve similar scrutiny. Rebates, spread pricing, brokerage payments and vertically integrated pharmacies make it nearly impossible to determine who is being paid for what. Reform must ensure that eliminating one hidden payment does not simply cause it to reappear under another name.
These changes will not remake American health care before Election Day. Some require Congress. Others will provoke lawsuits, lobbying campaigns and warnings that reform will close hospitals or halt medical innovation.
But Trump does not need to solve every problem before the midterms. He just needs to establish direction, produce additional visible savings and convince voters that Republicans understand the difference between a healthy economy on paper and an affordable life at home.
And time is certainly running short. Republican majorities in both houses are at risk, and the president’s party historically struggles during midterm elections. A sustained health-affordability campaign would therefore be sound policy and smart politics.
The prescription-drug decline offers Trump something presidents seldom receive: proof that Washington can patiently build upon previous work and eventually deliver a result. He should claim his share of the achievement, give Biden his smaller but legitimate share — and then get back to work.
(Contributing writer, Brooke Bell)