Trump’s Drug Pricing Policy Deprives Patients in Europe of New Treatments

(Bloomberg) — Frank Hennemann sometimes coughs 400 times a day. His airways are damaged by a lung condition called bronchiectasis, which he describes as feeling like two trucks are parking on his chest.

After decades of research, there’s finally a medicine to alleviate his symptoms, but Hennemann lives in Germany. One reason he can’t get it there is Donald Trump.

The company behind the new treatment, Insmed Inc., won’t launch in Europe until it can better understand the financial implications of a Trump directive that could upend the math drugmakers rely on to recoup their research investments.

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For years, pharma companies have generated most of their profits in the US, where they can charge far more than in Europe. But Trump’s policy calls for them to price their new medicines in the US at the level of other wealthy countries. That’s left companies ranging from Biogen Inc. to Roche Holding AG with a vexing choice: either convince Europe to pay more, or slash their US prices. Some are considering a third, more drastic option: skip parts of Europe altogether.

“This is a political issue,” Hennemann said in an interview, regretting that “decision-makers count numbers, not emotions or patient stories.”

Introducing a treatment in Europe could end up halving the product’s US price under the policy dubbed “most favored nation,” according to Darius Lakdawalla, chief scientific officer at the USC Schaeffer Institute.

“Would a drug company be willing to walk away from that market in favor of preserving over 30% of their US profits?” Lakdawalla said. “My guess is they almost certainly would.”

These calculations could soon deprive European patients of crucial innovation. A breast-cancer pill from Roche may not get launched in the drugmaker’s home country of Switzerland. Another major European pharma firm described a significant shift and said every launch is being reconsidered, according to people familiar with the company who declined to be identified by name. And Biogen’s new medicine for postpartum depression, Zurzuvae, will likely reach women only in a handful of European countries at first.

“We are certainly looking at this from an MFN point of view,” Biogen’s Chief Executive Officer, Chris Viehbacher, said on an earnings call in February. “And that will mean that it’s probably a target of about three or four countries that we’re going to be starting with as opposed to the whole 27.”

The research firm GlobalData, which tracks new drug launches in Europe, found a 35% decline in the 10 months after Trump’s drug pricing announcement last May, compared to the prior 10 months. The drop was even steeper when the analysts focused on the countries the US policy relies on for comparison.

Roche, for example, is gearing up to release what may become its biggest seller yet: a pill for breast cancer called giredestrant. The US will be the first market. As for Europe, “we will continue to have discussions with European countries and see where we are,” CEO Thomas Schinecker said in a recent interview. In Switzerland — one of the reference countries key to the Trump price benchmarking — the medicine may never be broadly available, he said.

Schinecker and others pharma executives are pushing to boost prices in Europe, sparking a mix of resistance and soul-searching. “Every rich country should contribute to funding innovation,’’ according to Schinecker.

AstraZeneca Plc’s chief executive told a German newspaper this week the company wouldn’t launch medicines in the country if it’s not worth it.

“Until now, medications have been expensive in the US and cheaper in Europe,’’ CEO Pascal Soriot said. “This has led to companies financing their high research and development costs primarily with profits from the US. It’s unfair that the Americans pay more. Just as with NATO, Europe must also make its fair contribution.’’

At stake is the tension between two diverging approaches to health care, whose fortunes are now uncomfortably linked by the Trump policy.

A patchwork of huge corporations dominate the US health-insurance landscape, which is geared toward rewarding innovation even if not everyone can benefit. In Europe, although countries differ, systems tend to be heavily regulated and many elements are not-for profit, with a focus on keeping basic care affordable for everyone. Countries like Germany and the UK evaluate the cost of a drug on the basis of the benefit it brings to patients.

Madrigal Pharmaceuticals Inc. experienced the difference firsthand in recent months when it introduced a new treatment for a potentially deadly liver disease. The US biotech opted to charge German insurers $39,500 a year for the medicine — the same as in the US. But a German panel that evaluates drug effectiveness found no added benefit for the product, Rezdiffra, compared to standard therapy, suggesting Madrigal will likely need to negotiate a discount.

A spokesman for the company said “the cost-effectiveness of Rezdiffra is clear,” but declined to comment on whether Madrigal will lower its price or opt to pull the drug from Germany altogether. Going forward, the biotech will prioritize European countries “where we believe there is opportunity for innovation to be recognized” like France, Italy, Spain and the UK, Chief Executive Officer Bill Sibold said in an interview.

There are levers that Europe can pull that could make the region more attractive for new launches, such as speeding up decisions on the reimbursement of medicines and implementing outcomes-based or long-term payment models, said Magda Rosenmöller, an associate professor at Spain’s IESE Business School. “We should definitely take it as a wake up call in Europe,” she said.

Before MFN, about 40% of all drugs approved across the world were not launched on the continent, Otello Stampacchia, founder of venture capital firm Omega Funds, estimates. “MFN is just going to make it a lot worse,” he said. “I know a lot of pharma CEOs who have gone to Brussels, who have gone to national governments and said, `We can’t launch here.”

It’s hard to tell the ultimate impact of Trump’s pricing policy because there isn’t a law yet. Drugmakers aren’t certain to what extent they need to follow it and whether, for instance, they would need to charge the Medicare program and private US insurers the same prices as in Europe. One way companies could get around it is by setting the same list price on both continents but giving European countries larger confidential rebates, according to the USC Schaeffer Institute’s Lakdawalla.

As for Hennemann, he founded a patient organization when he was diagnosed with bronchiectasis two and a half years ago to improve care for those with the lung condition, especially during flare-ups. The group advocates for better access to therapies.

“Who gets to decide what is my quality of life versus a price?” he said. “We can get louder as a patient organization, but this is driven by politics.”

–With assistance from Naomi Kresge, Lisa Pham and Sonja Wind.

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