The Trump effect on high drug prices

Salma Khalik explains why US leader Donald Trump is up in arms against high drug prices, how pharmaceutical companies have reacted, and what effect his executive order could have on the rest of the world.

- Salma Khalik

If US President Donald Trump had his way, the price of medication in the US would fall drastically — while the rest of the world would end up paying more, possibly a lot more.

His declaration on Facebook on May 11 that he wants prices of drugs sold in the US to reflect the cheapest prices globally sent shares of large pharmaceutical companies tumbling across the world, with several losing 3 per cent or more of their stock market value within hours.

But the steep plunge reversed just as abruptly once the executive order signed by Mr Trump on the morning of May 12 was made public. This was because the order lacked details, which led some observers to note that there was more bark than bite in his words.

Today, the US, with 340 million people, or less than 5 per cent of the world's population, spends about US$5 trillion (S$6.5 trillion) a year on healthcare — and accounts for about 45 per cent of global pharmaceutical sales.

One reason is that people in the US consume more medicine per capita than the rest of the world. Since they use more, they buy more, and hence spend more on drugs.

Another reason, which is what upsets Mr Trump, is that prices of drugs, particularly those still under patent, are generally much higher in the US than anywhere else in the world.

Pharmaceutical companies say the high prices paid in the US allow consumers there to be among the first to get any new treatments.

Mr Trump gave the example of a "fat drug", without naming it, that costs 10 times more in the US than in some other countries.

He was likely referring to the highly popular diabetes drug Ozempic, which is also prescribed for weight loss under the trade name Wegovy.