Pharmaceutical Giants: It's Simple to "Cut U.S. Drug Prices in Half"
Trump signed an executive order to drastically cut drug prices, requiring Americans to pay the lowest prices for drugs that other developed countries pay, which will undoubtedly pose a significant blow to the pharmaceutical industry. In response to the threat of drug price reform, pharmaceutical giant Roche proposed a solution to bypass intermediaries and sell directly, stating that this move could easily achieve the goal of halving drug prices. "If the U.S. wants to cut drug prices by 50%, it's very easy. We can sell directly."
Faced with the increasing pressure from the U.S. government to control drug prices, Swiss pharmaceutical giant Roche has proposed a plan that could reshape the industry landscape. Its CEO stated that if they could sell drugs directly to patients, bypassing intermediaries, U.S. drug prices could be "very easily" cut in half.
According to a report by the Financial Times on July 24, Roche CEO Thomas Schinecker revealed that the company is in talks with the U.S. government regarding this plan. He pointed out that in the current drug supply chain, intermediaries known as Pharmacy Benefit Managers (PBMs) capture up to half of the profits while "not bearing any risk for innovation." Schinecker stated:
If the U.S. wants to cut drug prices by 50%, it is very easy. We just sell directly.
For a long time, the pharmaceutical industry has blamed the high drug prices in the U.S. on a complex distribution system. PBMs, acting as agents for insurance companies, manage drug reimbursement lists and negotiate prices with drug manufacturers, reaping significant profits in the process. Roche's plan aims to significantly reduce intermediary costs by establishing direct sales channels.
Aiming for a 90% Cut! Trump Signs Executive Order to Slash Drug Prices
Roche's statement comes against the backdrop of the Trump administration threatening to impose severe price controls and high tariffs on the pharmaceutical industry.
Trump has signed an executive order for "most favored nation" status, requiring drug companies to offer the lowest drug prices in the U.S. that are no higher than those in other developed countries. If implemented, this executive order would deal a significant blow to the pharmaceutical industry.
An earlier article from Wall Street Watch reported that Trump said the principle of this executive order is to make Americans pay the lowest drug prices that other developed countries pay, "some prescription drug and medication prices will almost immediately drop by 50% to 80% or even 90%." The U.S. Department of Commerce will begin investigating how the European Union "extorts" drug companies, stating that unless the EU agrees to sell its drugs at "very low" prices, it will block EU drugs from entering the U.S.
A study conducted by the Rand Corporation for the U.S. Department of Health and Human Services shows that U.S. drug prices are, on average, 2.3 times higher than those in 32 other OECD member countries.
Although the pharmaceutical industry has not yet been affected by Trump's tariffs, the president has hinted at imposing tariffs as high as 200% on the industry. This dual pressure has forced large pharmaceutical companies like Roche to seek new strategies to avoid severe profit margin squeezes.
In response to potential policy shocks, Roche has taken a series of defensive measures. The company stated that it has prepared for any tariff impacts this year by expanding production and relocating inventory to the U.S. In April of this year, Roche announced plans to invest $50 billion in the U.S. for production and research and development.
Schinecker stated, "We hope the U.S. government can see that all the investments we and other companies are making are aimed at producing the drugs that the U.S. needs." Roche maintains its full-year performance guidance for 2025, expecting group sales to achieve mid-single-digit growth and core earnings per share to achieve high-single-digit growth
