By Damian Paletta 

WASHINGTON -- President Donald Trump on Tuesday told pharmaceutical executives that he wanted them to bring drug prices "way down," but he promised he would curb regulations and lower tax rates to boost their competitiveness.

At a White House meeting, Mr. Trump said Medicare and Medicaid are spending too much money on drugs, and he said in many cases these programs don't have enough bargaining power when they are purchasing drugs.

"We have to get the prices way down," Mr. Trump told the executives.

High drug prices have been an object of Mr. Trump's criticism throughout his campaign, and he said after the election that drug companies were "getting away with murder" on their prices. Yet the industry supports many of the new administration's stated goals, especially a corporate tax overhaul.

"We would be able to bring jobs back to the U.S. if there was a tax change," said Pfizer Inc. CEO Ian Read in an interview. Mr. Read didn't attend the White House meeting because the company reported earnings Tuesday.

After the White House meeting, some executives who attended sounded upbeat notes. Merck & Co. CEO Kenneth Frazier referred to the "great conversation" about tax policies, innovation and regulatory reform.

President Trump told the executives at Tuesday's meeting that there was "price fixing by the biggest dog in the market -- Medicare," and said this must stop.

It wasn't clear what Mr. Trump meant by Medicare fixing prices. The largest share of Medicare's drug purchases are made by the Part D program for seniors and the disabled. The program was designed as a market-based system under a 2003 law signed by President George W. Bush.

The law prohibits the government from negotiating prices directly with pharmaceutical companies, as the government does with vendors in other areas of Medicare. Instead, the government contracts with private insurers to run the program and bring down costs by negotiating lower net prices via rebates. The government's payments to insurers are based on a complex funding formula based on bids submitted by insurers each year.

Allowing the government, rather than private insurers, to negotiate drug prices has mainly been advocated by Democrats, with Republicans generally opposed. Many Republicans say changing the system would make the program less efficient and harm the development of new drugs by limiting the pharmaceutical industry's pricing power.

The meeting between Mr. Trump and the pharmaceutical executives is one in a series of gatherings he has held with business leaders and others during his first two weeks in office, as he works to find more ways to boost economic growth. Attendees included Robert A. Bradway, chairman and chief executive officer of Amgen Inc., Joaquin Duato of Johnson & Johnson, Mr. Frazier of Merck, Robert J. Hugin, executive chairman of Celgene Corp., Joseph Jimenez, chief executive officer of Novartis AG, and David A. Ricks, president and chief executive officer of Eli Lilly & Co.

The industry has been trying to present itself as a valuable part of the U.S. economy, employing tens of thousands in high-skilled positions and contributing important innovations, while shifting blame to health plans for the increasing out-of-pocket drug costs that patients face.

Companies have also tried to avoid drawing further ire. Drug executives, unlike their tech counterparts, were largely silent about the Trump Administration executive order on immigration, even though many industry scientists are foreign-born.

Mr. Trump said at the meeting that he would be working to scale back regulations he said force pharmaceutical companies to spend years and billions of dollars developing drugs before they can get federal approval. He said he would soon nominate someone to head the Food and Drug Administration who would help with this overhaul.

President Trump hasn't named a new FDA commissioner yet, but candidates he is considering have conservative views on regulation and would be likely to scale back requirements on approval of drugs and medical devices. The new commissioner will have more discretion to do so under a law passed a few weeks ago, known as the 21st Century Cures Act, which sets out steps -- some criticized by consumer groups -- to speed and simplify drug approval.

Even so, the majority of new drugs are likely to continue to have undergone clinical trials, which can be costly and time-consuming.

Prescription drugs generally cost considerably more in the U.S. than they do elsewhere, and Mr. Trump said foreign countries are "freeloading" -- with price controls that reduce the resources of U.S. drug companies to finance R&D. He said U.S. trade policies "will prioritize that foreign countries pay their fair share for U.S.-manufactured drugs."

Mr. Trump also repeated his calls for drug companies to do more of their manufacturing in the U.S. instead of overseas. He said the business climate in the U.S. will change soon, in part because he is committed to lowering the corporate tax rate and streamlining regulations. Pharmaceutical companies traditionally pay a low tax rate because of the way they structure their businesses, but they have still pushed for a lower rate for years.

In addition, many pharmaceutical companies want a "territorial" tax system that would lighten or remove the U.S. tax on U.S. companies' foreign income. Mr. Trump has been less clear about his views on international taxes than on his desire for a lower rate.

--Joseph Walker and Richard Rubin contributed to this article.

Write to Damian Paletta at damian.paletta@wsj.com

 

(END) Dow Jones Newswires

January 31, 2017 14:44 ET (19:44 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.
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