Context:

President Donald Trump signed an executive order to lower prescription drug prices by imposing 'most favored nations' pricing, which mandates that Americans pay the same price as the lowest paid for the drugs in other developed countries. The order aims to reduce pharmaceutical prices significantly, but critics argue it equates to price control and could lead to drug shortages, drawing parallels to historical price control failures. Michael Cannon of the Cato Institute warns that such measures, similar to rent control, have historically caused shortages in various sectors. The White House defends the order, stating it corrects anti-competitive practices forcing Americans to subsidize healthcare in other countries. Critics, including the Pharmaceutical Research and Manufacturers of America, claim this policy could reduce drug availability and innovation, negatively impacting American patients.

Dive Deeper:

• President Trump’s executive order requires drug companies to reduce prices for prescription drugs to match the lowest prices paid by other developed countries, aiming for reductions between 50% to 90%.

• The initiative is argued to be a form of price control, which has historically led to shortages, as seen in other sectors like housing and food, raising concerns about similar outcomes in the pharmaceutical industry.

• Michael Cannon from the Cato Institute criticizes the order, comparing it to rent control and anti-gouging laws that have historically resulted in shortages.

• The White House argues that the executive order addresses anti-competitive practices, ensuring Americans don't pay higher prices than Europeans for the same drugs.

• Critics, including the Pharmaceutical Research and Manufacturers of America, argue that the order could harm patients by reducing drug availability and deterring pharmaceutical investment and innovation in the U.S.

• Prescription drug prices have significantly increased in recent years, with many prices surpassing inflation rates, prompting the order as a response to these rising costs.

• In addition to general drug pricing, a separate executive order seeks to standardize Medicare drug payments, potentially lowering patient costs by up to 60%.