Illustration: Allie Carl/Axios

The America First Policy Institute — the think tank founded and staffed by Trump officials to advance his vision for the country — has written a new paper making the case against what it calls pharmaceutical “global freeloading” and outlining various policy measures to address it.Why it matters: The policy paper — well-timed to the political moment and shared exclusively with Axios — signals that Trumpworld is serious about addressing the fact that the U.S. pays way more for prescription drugs than other countries.It also provides a messaging framework that flips some of the conventional drug pricing talking points — from both parties — on their head, managing to be both generally pro-pharma and against international price disparities at the same time.And, as is becoming common these days, the paper makes its case in terms friendly to the MAHA movement, especially through its focus on chronic disease.What they’re saying: “America, along with the rest of the developed world, we’re dealing with some really crushing health care issues, some big, crushing chronic care issues, and prescription drugs are going to be part of the menu of things that Americans are going to need to deal with this really big crisis,” said Charlie Katebi, the author of the paper.”And frankly, other countries have not been paying into the pool of innovation.”The big picture: Trump’s first-term administration proposed tying U.S. prescription drug payments to what other countries pay for the same drugs, but the proposals were never implemented.Trump campaigned on a pledge to do something similar if given a second term, but his commitment to the issue was questioned after his campaign website removed a video of him pledging to take it on.That’s led to a lot of will-he-or-won’t-he in the two months since Trump’s taken office. The policy paper — much more detailed than anything that’s appeared on Trump’s campaign site or come up in confirmation hearings — is a strong signal that big changes are indeed on the horizon.And perhaps most importantly, it sets up a counterargument to what’s been traditional GOP thinking for decades, which is generally that government interference in pricing will come at the cost of new drug development.”This is not a zero-sum game. American patients can pay less, and we can still have innovation,”said former Louisiana Gov. Bobby Jindal, the chair of AFPI’s Center for a Healthy America.By the numbers: List prices of brand drugs in the U.S. were on average more than four times higher in the United States than in other wealthy countries in 2022, according to a RAND study published last year.When accounting for rebates and other discounts, the study found U.S. prices for brand drugs were still more than three times higher.State of play: Mehmet Oz, Trump’s nominee to head the Centers for Medicare and Medicaid Services, last week became the latest high-ranking member of Trump’s orbit to call out the pharmaceutical industry and drug prices.During questioning from one senator that referenced the U.S. paying multiple times what other wealthy countries pay, Oz responded in what’s becoming pretty standard language from the new administration.”President Trump has been very clear that he wants me to reduce drug prices, not just for the government payees, but also for beneficiaries. International reference pricing is a way of doing that,” Oz said.In HHS Secretary Robert F. Kennedy Jr.’s confirmation hearing, he was also asked about the topic, responding that “we should end that disparity” and that he’s spoken with Trump about it.Between the lines: The AFPI paper generally argues that other wealthy countries underpay for drugs, and that comes at the cost of new treatments and cures for everyone, including Americans.The main point of the paper is that the U.S. should find ways to stop other countries from “freeloading” off of American investment in R&D and the incentives the U.S. gives drug companies to develop more drugs via higher prices and thus profits.Bringing more drugs to market would increase competition, and forcing higher prices in other countries “would provide U.S. policymakers with greater flexibility to lower drug prices without harming innovation.”Lower prices for Americans is presented as an almost secondary point. “Make no mistake about it: A big driver of this is also reducing prices for American patients. Certainly when I talked to the president, that was a very important emphasis,” Jindal said.The intrigue: The political beauty of the AFPI argument is that it tackles the idea that Americans are getting ripped off while removing the threat to innovation that drug pricing proposals usually are accused of posing.That could give cover for whatever comes next to more pro-pharma Republicans, while still satiating the part of the party that’s grown irritated with the industry.”Just waving your hands and saying any attempt to reduce prices will reduce innovation — that won’t fly,” Katebi said Diving into the weeds AFPI’s paper isn’t super prescriptive about what should be done about the global freeloading issue; it instead presents a menu of options available to Congress and the administration.Here’s your quick summary:“Most favored nation” pricing within government programsIf this sounds familiar, it’s because the first Trump administration pitched a version in 2020, although it was rescinded by the Biden administration.The general idea here is to limit how much Medicare and Medicaid spend “on certain high-cost drugs” in relation to the lowest price paid in other wealthy countries.The policy would present drugmakers with a choice, the paper argues: “Raise their prices in other countries so they can maintain their prices in the United States or lower their American prices to match the lowest price they offer other countries.”This would lead manufacturers to reduce or get rid of the discounts they offer in other countries, which would ultimately “empower drug manufacturers to invest significantly more resources into developing new cures and treatments for sick patients.”2. MFN pricing through the Inflation Reduction ActWell, this one is an eyebrow-raiser. It argues for using Democrats’ signature drug pricing law, which allowed Medicare to negotiate the prices of certain drugs, to tie what the U.S. pays for those drugs to what other countries pay.Specifically, CMS could consider the drug’s lowest international price when determining its the maximum fair price — something that would simply require revised guidance from the agency.3. MFN for future drugsPretty self-explanatory. This would, per the paper, ensure drugmakers could recoup their R&D investments in products already on the market while giving them enough time to negotiate better prices for future drugs in other countries.Policymakers could still find ways to reduce costs for seniors who use expensive drugs already on the market, like applying discounts to the most expensive brand-name drugs already available, for example.4. MFN for commercial health plansAnything that extends into the private market is a huge leap. But the paper notes that two Republicans, Sens. Rick Scott and Josh Hawley, introduced a bill doing just that in 2019.That bill would ban drug companies from charging list prices for FDA-approved drugs that were greater than the lowest list price offered in a basket of other wealthy countries.5. The International Pricing ModelThis is somewhat similar to MFN, but it limits Medicare and Medicaid spending to the average price that other wealthy countries pay. CMS considered a version of it as a demonstration program during the first Trump administration.6. Prohibiting global discounts for Medicare participantsDrug manufacturers would be banned from participating in Medicare if they charge other countries lower prices than they’re charging Medicare.7. Using trade authorityI’m not a trade policy expert, and most readers of this newsletter aren’t trade people either. But at a high level, according to the paper, “[p]olicymakers could also use America’s negotiating power in trade relations to pressure other countries to abandon freeloading policies.”My thought bubble: At this point, I’d bet that the administration is going to attempt to do something big — like any of the things on this list — to tackle what AFPI has dubbed “freeloading.”Why? Because the topic is getting some serious momentum, it aligns pretty spot-on with larger Trump rhetoric, and no one from the party’s traditional health policy wing really has the cred to stop it, if they even want to.”I think there will still be folks who will try to defend the status quo,” Jindal said. “Look, I’m a free-market conservative Republican. I worry at some point it does begin to look like crony capitalism, if folks are willing to defend market distortions for companies that happen to be very generous political donors or very intertwined with the government.”What I’m watching: How pharma will respond, especially under a scenario in which they aren’t necessarily giant losers.”We’ve highlighted for years that some countries are not paying their fair share today for innovation, which impacts the development of future treatments and cures,” a PhRMA spokesperson said.”We are also the only country where over half of every dollar spent on medicines goes to others in the supply chain that do not even make medicines, like PBMs, insurers, hospitals and others.”from Healthcare Dive: Cigna closes $3.7B sale of Medicare business to HCSC The deal, which removes Cigna from the volatile Medicare Advantage market, closed a little over a year after being announced.

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