U.S. President Donald Trump has signed an executive order aimed at lowering drug prices in the U.S. to levels seen abroad, prompting heightened alertness from the global pharmaceutical and biopharmaceutical industries. Companies that export pharmaceuticals to the U.S. are likely to see a drop in revenue. Although Korea's pharmaceutical exports to the U.S. are not substantial, which suggests minimal impact on most corporations, some companies distributing drugs in the U.S. are weighing the pros and cons.
◇Tackling the drug distribution cartel is the goal
On Dec. 12 (local time), President Donald Trump signed an executive order requiring pharmaceutical companies to choose within 30 days whether to lower prescription drug prices in the U.S. or face new limits on the amounts paid by the government.
On that day, President Trump noted, "The U.S. will no longer subsidize foreign healthcare," adding that "the exorbitant profits and price increases of major pharmaceutical companies will no longer be tolerated." He also stated on his social media platform Truth Social that "drug prices will be reduced by 59%."
The primary aim of this executive order is to lower the prices that Americans pay for prescription drugs to levels consistent with those in other countries. The U.S. Department of Health and Human Services plans to implement a program allowing patients to purchase drugs directly from pharmaceutical companies at the most favored nation price. The Minister will communicate the target for the most favored nation price for U.S. patients to the pharmaceutical companies within 30 days.
The industry interprets the crux of the executive order as reforming the structure of Pharmacy Benefit Managers (PBMs). PBMs are central to the distribution of pharmaceuticals in the U.S., selecting which drugs to include in the insurance plans of partner insurers and receiving legal rebates in return. They also play a role in distributing rebates received from pharmaceutical companies to insurers and government agencies. As a result, the expenses incurred by corporations distributing drugs in the U.S. increase, causing drug prices to be higher than in other countries.
Through this executive order, the Trump administration aims to improve intermediary distribution structures like PBMs to encourage price reductions on expensive pharmaceuticals. From the perspectives of PBMs and pharmaceutical companies, concerns about declining revenue are rising. The Wall Street Journal (WSJ), citing industry insiders, predicted that if this policy is implemented, the industry could face losses of at least $1 trillion (approximately 1,400 trillion won) over the next decade. Major pharmaceutical companies are pushing back against this executive order. The Pharmaceutical Research and Manufacturers of America (PhRMA) stated that "government intervention in pricing is harmful to patients."
◇Expectations for the expanded prescription of biosimilars
On this day, the industry analyzed that the impact on domestic corporations compared to large pharmaceutical companies in the U.S. and Europe is likely to be minimal. This is due to the relatively small number of Korean companies exporting finished pharmaceuticals to the U.S. and because the current executive order targets local distribution structures and high-priced drugs.
Hwang Joo-ri, head of the Korea Bio Association's exchange and cooperation division, commented, "The impact of the drug price reduction policy on expensive new drugs will be greater, and since not many places are selling finished drugs in the U.S., the influence on domestic companies will be limited."
A representative from Huons, which exports local anesthetics to the U.S., stated that "the drugs targeted for price reductions have not yet been disclosed, but it is expected that high-priced drugs will be the main focus," adding, "the price difference for Huons' lidocaine and other local anesthetics is not substantial compared to high-priced drugs in the U.S. and Europe, so the impact on local sales is expected to be limited."
Some corporations may be impacted by this executive order. Corporations involved in biosimilars, like Samsung Bioepis and Celltrion, hope that the U.S. government will create an environment that increases prescriptions for biosimilars to facilitate price reductions.
Celltrion stated, "If the intermediary distribution structure in the U.S. is improved, the actual prescribing prices for biosimilars will decrease, making the benefits to the government and patients clear, which could accelerate the expansion of biosimilar prescriptions to a level similar to that in Europe."
Deputy Minister Hwang Joo-ri mentioned, "Biosimilars have already seen significant price reductions through public insurance, so if prices are lowered focusing on original new drugs, it could be favorable for expanding the sales volume of biosimilars." Celltrion also anticipated, "If parallel imports are activated to supply drugs at the most favored nation price as announced in this executive order, there may also be opportunities to introduce additional products that have not been previously launched."
◇Monitoring subsequent tariff announcements and price setting
On the other hand, there are also voices of concern. Since the prices of biosimilars are set with reference to the prices of original drugs, profitability may decrease. If the prices of original drugs fall, so too could the prices of generics. President Trump previously indicated that he would announce item-by-item tariffs on pharmaceuticals, leaving some uncertainty.
There are also doubts about whether the U.S. can bring about substantial change. An anonymous securities analyst noted, "Both large U.S. pharmaceutical companies and PBMs have very strong lobbying power," questioning whether the U.S. government and Congress can successfully reform the pharmaceutical distribution system and continue policies aimed at reducing healthcare expenditures.
Samsung Bioepis stated, "We will continue to monitor the changes in policies and regulations following the U.S. executive order and respond accordingly."