Trump seeks to lower drug costs for U.S. employers to match European prices

That means the 17 companies would limit the prices Medicaid plans pay for drugs to the lowest prices paid for the same drugs by buyers in Canada, Europe, Japan and other rich countries.

Trump also called for the companies to provide most-favored-nation pricing for commercial plans, as well as for Medicaid and Medicare plans, for all new drugs "both upon launch and moving forward."

The United States is home to about 340 million, or 4.1% of the world's population. It accounts for a 38% share of the gross domestic product of the countries in the Organisation for Economic Co-operation and Development — a group for the world's high-income countries.

U.S. prices for new drugs are much higher than in the rest of the world, partly because U.S. government agencies and investors account for about 60% of OECD country spending on prescription research and development programs, according to a report commissioned by the Pharmaceutical Research and Manufacturers of America.

"Domestic MFN pricing will require you, and all manufacturers, to negotiate harder with foreign freeloading nations," Trump wrote in the CEO letters, according to a copy of one letter that he posted on the Truth Social social media site.

"Americans are demanding lower drug prices, and they need them today," Trump wrote. "Other nations have been freeloading on U.S. innovation for too long; it is time they pay their fair share.

The backdrop: Trump talked about most-favored-nation drug pricing negotiation strategies while he was running for president, but he did not talk about efforts to require access to MFN pricing for commercial plans when he released a drug price reduction executive order in May.

Related: Trump takes on Big Pharma with new executive order calling for U.S. to match lower prices abroad

The new letters show that the Trump administration wants to make MFN pricing available to employer-sponsored health plans and other commercial health coverage providers, as well as to government-backed health coverage providers.

Perspectives: Pascal Soriot, the CEO of AstraZeneca, said the world's pharmaceutical research sector does need a rebalancing of pricing.

"The U.S. can no longer pay for the R&D for the world," Soriot told securities analysts during a conference call that AstraZeneca held July 29. "It's not sustainable."

Neil Bradley, the chief policy officer at the U.S. Chamber of Commerce, said in a statement released Friday that U.S. policymakers should come up with another way to bring about prescription drug R&D reform.

Governments outside the United States hold down what their programs pay for drugs, and "importing foreign price controls into the U.S. health care system will harm patients by delaying access to new, life-saving medicines," Bradley said.

Price controls delay patients' access to new treatments by as much as 500 days, and Chamber research suggests a strict MFN policy could cut spending on U.S. clinical drug trials by 75%, Bradley said.

Sally Pipes and Wayne Winegarden, health policy analysts at the Pacific Research Institute's Center for Medical Economics and Innovation, argue in a new brief that adopting a broad MFN strategy in the United States would cause the U.S. pharmaceutical industry to "follow Europe down a path of stagnation."

"Instead of ending the freeloading, an MFN model would reward it," Pipes and Winegarden write. "It would let the same foreign bureaucrats who have already destroyed their own biotech industries with price controls impose the same damage here."

Margaret Kyle, an economist at the Center for Industrial Economics in Paris, has suggested that manufacturers have many strategies for getting around MFN pricing strategies and other "reference pricing strategies," or "name your price" pricing strategies.

One is for manufacturers to make the versions of products introduced in different countries difficult to compare, and another is to use secret rebates to hide what each buyer is really paying for a drug, Kyle says.

What it means: If the Trump administration's MFN effort succeeds, that could cut the prices employer plans pay for brand-name drugs coming online soon, but, if critics like Pipes and Winegarden are right, the pipeline of new drugs could then sputter.

A reduction in the number of new drugs would hold down employers' drug spending in the short run, but it might increase spending and hurt the quality of care in the long run, by reducing the supply of new antibiotics, new non-opioid painkillers, new and better alternatives to GLP-1 agonists like Wegovy, and new treatments for conditions such as cancer, Alzheimer's disease and Parkinson's disease.

Some critics of the current world drug R&D funding strategy say governments could reform it by having the government or private nonprofit organizations pay for more research or by using other strategies to reduce the role of private, for-profit organizations in funding drug R&D.