Despite Medicare being one of the world's largest drug purchasers, prices in the U.S. were 1.8 times higher compared to the other economies.
"We're taking aim at the global freeloading that forces American consumers to subsidise lower prices in foreign countries through higher prices in our country", Trump said.
Health Secretary Alex Azar said President Trump's bid to tie what the US government pays for certain Medicare drugs to what other nations pay won't cripple innovation or access to vital treatments, even if the plan is one of Big Pharma's "ultimate nightmares". "With this innovative approach, he is now proposing historic changes to how Medicare pays for some of the most expensive prescription drugs, securing for the American people a share of the price concessions that drug makers voluntarily give to other countries".
This supports a recently released HHS report, which found USA drug prices were almost twice as high as those in foreign countries.
Creating an index of prices tabulated from what countries with more centralized health coverage pay would allow the administration to drive down US drug costs without putting in place direct curbs on prices - though Azar rejected the idea that the administration was reading from the playbook of nationalized medical programs to bring the USA on par with the rest of the world.
Trump has criticized foreign governments with single-payer healthcare systems, such as the UK and France, that are able to negotiate prices directly with drug companies and often pay far less for the same medications than the United States.
"Americans pay more so other countries can pay less".
Drug industry lobby the Pharmaceutical Research and Manufacturers of America, or PhRMA, quickly criticized the proposal in a statement that appeared to be meant as a dig at universal healthcare - something that a growing number of political leaders have proposed for the USA - in addition to defending the United States pricing system. The so-called "target price" of these drugs, which include treatments for cancer, would be 126% of the average of what other countries pay.
That assumes drug companies couldn't increase prices in Europe or Japan, Azar noted, and that they couldn't create efficiencies elsewhere in their budget.
Trump, too, promised more to come and said he will soon announce "some things that will really be tremendous".More news: Red Dead Redemption 2 finally launches on Xbox One
HHS Secretary Alex Azar criticized a system in which other countries to pay significantly less for drugs than the US government.
"The reality is he could very easily not take this on and do what other administrations have done and let the prices keep rising". "President Trump asked us to fix this problem and here's how we plan to do it". "There was only a single case in which the US was paying lower than the global average". "At long last, the drug companies and foreign countries will be held accountable for how they rigged the system against American consumers".
The proposed rule also sets up a first-time system inside Medicare where drugs would be sold to vendors instead of directly to doctors and hospitals.
Physician-administered drugs cost Medicare $27 billion in 2016.
Already, however, there is skepticism about how much this will impact the drug industry. Medicare pays directly for them under its "Part B" coverage for outpatient care. It would remove incentives for doctors to prescribe more expensive drugs by paying them a flat fee for storing the medications instead of a fee based on a percentage of the drug's price.
"Something has to change in how Medicare pays for physician-administered drugs", Azar said at the Brookings Institution think tank in Washington. The report notes Part B is not subject to restrictions on the drugs that are covered, meaning there is little incentive to tamp down costs.
Trump has long promised sweeping action to attack drug prices, and health care is high among voters' concerns ahead of the November 6 elections. In a March Kaiser Family Foundation poll, eight in 10 respondents said drug costs are unreasonable and 92 percent said passing legislation to bring down the cost of prescription drugs should be a top or important priority.
The proposal is likely to run into major resistance from drug companies, as well as doctors, hospitals and some patient advocacy groups.
House Minority Leader Nancy Pelosi of California said if Trump wants to save seniors money he should seek congressional approval for Medicare to negotiate prices for its main prescription drug program, "Part D". However, the add-on payment would not be tied to drug prices.
High drug prices have also been a source of anxiety for many Americans.