By Michael Erman and Deena Beasley
NEW YORK/SAN DIEGO, June 30 (Reuters) - President Donald Trump has promised to make U.S. prescription drug prices the cheapest in the world, but a closely watched Medicaid pilot program could expose the limits of the buy-in among mid-sized and smaller pharmaceutical companies.
The administration convinced 17 of the largest global drugmakers to sign deals offering lower prices comparable to what is paid in other developed countries, referred to as "most-favored-nation"
pricing. Efforts to get the rest of the industry on board have run into delays lobbyists attribute to tepid interest.
The White House has said the most-favored-nation agreements already signed represent some 86% of the U.S. branded drug market by sales. It said the program would generate $64.3 billion in federal and state savings over the next 10 years, but that number is speculative.
About half of those savings would come from state governments, which still have until September to decide whether they want to participate in the program. Moreover, the pilot is a 5-year program and the $64 billion figure is over a decade.
The application period for the U.S. Centers for Medicare & Medicaid Services' pilot in its Medicaid program for more than 80 million low-income Americans was extended twice from its original March 31 deadline and finally wrapped up on June 11.
Companies participating would offer the Medicaid insurance program drug prices based on what other countries pay for five years.
DIFFERENT BUSINESS MODEL, LIMITED UPSIDE
"We don't have the breadth of drugs on the market that we can cut deals," Ionis Pharmaceuticals CEO Brett Monia told Reuters, adding that his company and others had been invited to come to arrangements. "But at the end of the day, we don't see the upside of cutting a deal," he said.
Mid-size companies like Ionis account for the development of most new innovative medicines, Monia said, but have different business models than big pharma companies and often rely on licensing deals with overseas partners to commercialize drugs outside the U.S.
Four industry lobbyists said that based on feedback from pharmaceutical companies, mid-sized and smaller drugmakers have not been lining up to sign up for the program. With fewer drugs than larger rivals, cutting prices could have a dramatic impact on their bottom line, they said.
"There is no real upside," one lobbyist said, adding that companies are likely to "steer away" from any voluntary initiative that limits pricing autonomy. The lobbyist spoke anonymously because they were not authorized to speak publicly about the issue.
A CMS spokesman said drug manufacturers expressed "robust interest" in the model and that CMS received a significant number of applications from manufacturers.
WHITE HOUSE PUSHES PRICING CHANGES
The Medicaid pilot is one of several Trump initiatives aimed at most-favored-nation pricing and reducing U.S. drug spending, which was $60 billion for Medicaid alone in 2024.
Out of 19 of the next largest drug companies contacted by Reuters, only Japan's Astellas confirmed it had applied for the program. The company's largest drug, prostate cancer treatment Xtandi, was developed and commercialized with Pfizer, which previously signed a deal with the administration. U.S. sales accounted for around 45% of Astellas' 2025 revenue.
"We determined that this application represents the most constructive path forward in a complex and rapidly evolving policy environment," an Astellas spokesperson said in an email.
Two other companies with substantial U.S. business - Germany's Bayer and Japan's Daiichi Sankyo - said they were still reviewing their options, despite having missed the deadline to apply. The other 15 companies contacted by Reuters declined to comment on the program or did not respond.
Deals the large drugmakers signed committed them to lowering prices on some of their drugs sold in Medicaid, but the details are not public.
Analysts have said the pilot's impact will be mitigated by the fact that Medicaid price discounts exceed 80% off list price in some cases, potentially putting them on par with foreign nations, which typically pay about a third as much as the U.S.
Drugmakers that do not sign onto the Medicaid pilot could be subject to two other potentially mandatory CMS pilot programs that could set drug prices for the larger U.S. Medicare insurance program for older Americans as soon as October. Medicare drug spending is around two to three times the size of the Medicaid program.
Industry groups PhRMA and BIO have said they believe these programs would be illegal. BIO argued in letters to CMS that the programs go beyond the agency's authority and violate constitutional principles. It made similar arguments about elements of former President Joe Biden's Inflation Reduction Act, which pushed drug pricing cuts on dozens of medicines paid for by Medicare.
Pharmaceutical pricing consultant Brian Reid said some companies may be waiting to see how those programs get implemented and whether legal challenges succeed before locking themselves into any agreement.
"This is a pretty extraordinary use of CMS's power that hasn't quite been tested," Reid said. "That's not the same as saying legal challenges would succeed, but there's certainly a lot of questions that have never been litigated before."
(Reporting by Michael Erman in New York and Deena Beasley in San Diego; Editing by Caroline Humer and Bill Berkrot)
