MW Here's what Trump needs to do if he really wants to stop Big Pharma from ripping seniors off

By Brett Arends

Maybe we need more drug imports, not fewer

Donald Trump thinks foreigners are ripping us off when it comes to prescription drugs. He was talking about it again this week.

And you know what? He's right. America's seniors, as well as Medicare and Medicaid, are bearing the brunt of the costs.

But he's shooting at the wrong target.

President Trump's complaint is that foreigners and big pharmaceutical companies have conspired to steal America's pharma jobs, shipping factories overseas to places like Ireland.

A few weeks ago he went so far as to accuse the Irish of stealing America's drug industry.

He has a point, but only a small one. A new analysis conducted on behalf of Big Pharma itself and designed to show that Trump's tariff proposals would have a hefty impact on U.S. drug prices tells a more interesting story than it may have intended.

The report finds that most of the drugs sold in the U.S., about two-thirds by value, are made here in the U.S. And while we run a trade deficit on pharmaceuticals, it's not the outrage Trump seems to think it is. According to the analysis, America exports about $100 billion in prescription drugs to the rest of the world, while our imports amount to about $200 billion. But $60 billion of those imports are raw materials that are used in drugs that we manufacture for domestic consumption or for export. So the amount of finished products we import, $140 billion worth, is not ludicrously large compared with our exports.

In a $30 trillion economy - that's about the size of U.S. gross domestic product - launching a federal investigation into the industry, as Trump has done, over an alleged $40 billion gap between imports and exports - looks like a public-relations stunt.

The report from PhRMA, the industry's trade association, says that if Trump went ahead with his plans to place a 25% tariff on pharmaceutical imports, it would add $51 billion, or about 13%, to the price of prescription drugs.

The people bearing the brunt of this would be older Americans, and especially those over age 65, who by a wide margin are the most likely to take prescription drugs.

It may be no coincidence that Trump started hinting at reprieves on pharmaceutical tariffs just days after the report started circulating.

Yet the industry report admits that this figure comes with all sorts of caveats. The most important was that it makes no allowance for import substitution.

Companies could simply get around the tariffs by making more drugs here, which was Trump's initial point.

(Americans could also get around the tariffs by smuggling. Visit Mexico and you will see a pharmacy on every corner selling prescription drugs without a prescription for less than you'd pay in the U.S.)

The irony of all this is that Americans are getting ripped off by foreigners when it comes to drugs - big time - but not because too many of our ED pills are being made in Ireland and too many of our new diet drugs are being made in Denmark.

It's because we Americans are paying way, way, way too much for our drugs overall. We are subsidizing the rest of the world, to a degree so epic it almost defies belief.

This isn't me talking. It's a variety of independent studies, most notably ones conducted by the Rand Corporation, a highly respected think tank.

Americans are paying 72% more for the same prescription drugs than people pay in Mexico. We are paying 129% more than the Canadians. We are paying nearly three times as much as the British, French, Germans and Italians, and about 350% more than the Japanese.

Or, to put it another way, the Mexicans pay only 60% as much as we do. Western Europeans are paying about 35% as much, and the Japanese are getting the same drugs for about 70% off.

How do you feel about that?

Overall, says Rand, U.S. drug prices are about 278% higher than the drug prices in the rest of the developed world.

There are multiple reasons for this. Among them is that in many countries, such as the United Kingdom, a single government-run health insurer controls the market and can play hardball.

The net result is absolutely unconscionable, and it is probably the biggest single way we are getting ripped off by the rest of the world. Americans spend about $400 billion a year on prescription drugs. By this math, we are overpaying by $270 billion a year.

It's one thing to figure that we are paying more than people in poorer countries, where many people couldn't afford to pay as much as we do for lifesaving drugs. But Germany? Japan? Canada? These are rich countries.

The usual line from liberals is that this shows how greedy the big drug companies are. (Donald Trump, in the past, has made a similar argument.) But this makes no sense. If these companies were greedy, they would be charging the entire world these high prices. Anyway, they are no more greedy than companies in any other industry. If Apple $(AAPL)$ starts selling iPhones at cost, let me know. Pharma stocks have been underperforming the S&P 500 SPY for a generation.

The real beef is that we are subsidizing the rest of the world.

About nine out of 10 Americans over age 65 take prescription medications. That's a far higher proportion than among younger people. And older Americans are much more likely to have multiple prescriptions.

If Trump wants to help everyone in America who takes prescription drugs, and especially seniors, he should take executive action forcing pharmaceutical companies to sell their drugs in America for no more than they sell them for in other rich countries. Actually, he could threaten to import more - at foreign prices - unless they do. Mexico could pay for this wall by sending us cheap prescription drugs at Mexican prices, about 40% below U.S. prices.

This change would mean foreigners would be paying more, as well as Americans paying less. Unlike the usual voices, I am no enemy of the pharma industry, not even if we call it "Big Pharma" (or how about "Big Bad Pharma"?) and we talk about egregious things individual companies may do.

The cures for things like cancer and dementia aren't going to come from the offices of our congressional representatives or senators, or from media companies, or from the suburban parental basements housing angry pseudopopulist bloggers. They'll come from thousands of scientists with Ph.D.s and many years or decades of experience working - often fruitlessly - in very expensive laboratories.

Like everyone who has lost family members and loved ones before their time, I want more drug development, not less, and I want it faster. I just think the entire rich world should pay for it, not only Americans.

-Brett Arends

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May 02, 2025 12:17 ET (16:17 GMT)

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