U.S. Treasury Secretary Becerra Says Core Inflation in the U.S. Falls in Line with Drug Prices
U.S. Treasury Secretary Scott Becerra stated that core inflation in goods and services is declining, emphasizing that this trend is more critical than any single price indicator.
In July, prescription drug prices in the U.S. fell by 0.8% month-on-month and 3.1% year-on-year, marking the largest annual decline since 1963; the White House noted that prescription drug prices have decreased by a cumulative 3.9% since Trump took office.
Over-the-counter drug prices also fell by a cumulative 2.4% during the same period, and the medical care goods price index, which includes drugs, medical devices, and supplies, decreased by 2.7% year-on-year.
The White House attributed the drop in drug prices to the "Most Favored Nation" pricing policy and the TrumpRx platform; reports indicate that the increase in generic drug supply and changes in the prices of discount GLP-1 weight loss drugs have also contributed to the index's decline.
The statistical decline in the drug price index does not mean that all patients' actual out-of-pocket expenses are decreasing simultaneously: there may still be significant differences between retail drug prices, negotiated prices with insurance and commercial payers, manufacturer rebates, and pharmacy payment prices.
In market mechanisms, generic drug manufacturers, discount drug channels, and price-reducing purchasers benefit; original drug companies and intermediaries relying on high list prices and rebate arrangements face pricing pressure. The decline in drug prices directly reduces inflation in medical goods, but whether service inflation continues to cool depends on changes in wages, housing, and service demand.
Source: Public Information
ABAB AI Insight
The Trump administration previously promoted the "Most Favored Nation" pricing framework through the Executive Order on Lowering Prescription Drug Costs for American Patients, attempting to align U.S. drug payment prices with lower prices in other developed countries. This path continues the international reference pricing attempts from Trump's first term; its Medicare Part B Most Favored Nation model was halted by the courts after its introduction in 2020, indicating that administrative efforts to restructure drug prices often face multiple resistances from pharmaceutical companies, supply chains, and judicial processes.
The key to the capital path is not just lowering list prices, but transferring pricing power from original drug companies—pharmacy benefit managers—rebate systems, to government negotiations, cash discount platforms, generic manufacturers, and large-scale purchasers. Discounts on GLP-1 drugs will expand usage and channel coverage but will also compress the net income per patient for brand-name drugs, forcing pharmaceutical companies to maintain returns through sales volume, indication expansion, and next-generation products.
Historically, after the Hatch-Waxman framework fostered generic drug competition, U.S. drug prices often saw sharp declines at patent expiration points; after the entry of Humira biosimilars into the U.S. market, AbbVie similarly defended its market share through high-rebate versions and contractual arrangements. The current transition from "patent barrier pricing" to "joint price suppression by channels, payers, and policies" means that the decline in drug indices may initially focus on categories that are replaceable, discounted, and more competitive.
This is essentially a transfer of pricing power. The premise for pharmaceutical companies to maintain high net prices is patent exclusivity, fragmented payers, and opaque rebate chains; when the government references international prices, purchasers aggregate demand, and generics and biosimilars increase substitutability, producers' price discovery rights are weakened, and profit pools will be redistributed towards low-cost manufacturing, payment management, and large-scale distribution.
ABAB News · Cognitive Laws
- Price decline does not equal cost decline; the transfer of pricing power is key.
- Patents create premiums; substitutes determine the premium duration.
- Policies suppress list prices; channels rewrite profit statements.