The profit margin of drug-makers will be worn down by the ‘favored-nation clause’

The American President opened a window for potentially seeking to require that drug-manufacturers in the United States would now sell at the lowest price of the same drug in another nation of the world. This move will have a radical effect on the industry & will aggravate the dispute between administration & pharma firms over rising treatment prices.

On Friday, the President stated that the White House is working on an executive order for the implementation of ‘a favored-nation clause’, where the Americans will be paying on whatever the lowest nation’s price is.

He told the reporters that why should the other nations such as Canada pay much less than we do? They have enjoyed the benefit for a long time, pharma.

The danger could mark a dramatic increase in Trump’s ongoing dispute with the drug manufacturers. A measure which would tie the expenses of certain treatments in the Medicare program to the average cost in various countries is currently under the federal review.

It is not clear whether Trump is referring to the same system, which could be launched as a 5-year pilot program. But a proposal similar to a “most favored nation” clause, which is mostly used in trade agreements to make sure that one country receives the best available terms, would be a more far-reaching step.

Nations like Portugal and Greece have extremely low prices & forcing drug-makers to offer their products in the United States at those levels which would wear away the profit margins and might even lead some firms which have a less diversified portfolio to close or scale back operations.

The business model will no longer be workable, Health care consultant ‘Jane Horvath’ told FOX Business. He said that the strategy of the industry has evolved from making money on volume to rather making money on price because Wall Street really rewards high prices.