I’m Isaac Saul, and this is Tangle: an independent, nonpartisan, subscriber-supported politics newsletter that summarizes the best arguments from across the political spectrum on the news of the day — then “my take.”

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Today's read: 13 minutes.

My birthday wish…

On my first birthday after starting Tangle, I asked my couple thousand readers to subscribe or share the newsletter as a birthday gift. A lot has changed since then (mostly, the size of the mailing list and the size of our team), but I’m keeping the tradition alive. If you can think of a few people who might like Tangle, my only birthday wish is that you spread the word by emailing them about our work (you can click here for an auto-generated email draft, all you have to do is add an email address to send it to).

Speaking of the team…

Welcoming Kmele Foster.

Today, I am thrilled to announce that we have hired Kmele Foster as Tangle’s editor-at-large. Kmele will be joining our Managing Editor Ari Weitzman and me on the weekly podcast, contributing written pieces to Tangle, and helping shape our daily coverage across platforms. I’ve long admired Kmele’s work — he is one of the most inquisitive, open-minded, and unpredictable political thinkers in America today — and I’m thrilled to bring his unique perspective under the Tangle umbrella. Incredibly, Kmele is our 15th full or part-time employee (!) here at Tangle. To see our full announcement, and read more about the whole team, you can go here.

Quick hits.

1. President Donald Trump announced a commitment from Saudi Arabia to invest $600 billion in the United States via a series of deals, including an approximately $142 billion defense agreement. (The announcement) Separately, President Trump said that the U.S. will lift its sanctions on Syria “in order to give them a chance at greatness.” (The decision)
2. Israel said it targeted Hamas’s Gazan leader, Muhammad Sinwar, in an airstrike at a hospital in southern Gaza. Sinwar’s status is currently unknown. (The strike)
3. A federal judge ruled that the Trump administration can use the Alien Enemies Act to deport accused Venezuelan gang members, but it must give potential deportees at least 21 days’ notice and the opportunity to challenge their removals. (The ruling)
4. The Trump administration said it is cutting an additional $450 million in grants to Harvard University, claiming that the school has failed to address the government’s concerns about “race discrimination and anti-Semitic harassment” on campus. (The cuts)
5. The Food and Drug Administration announced it will conduct a review of ingestible fluoride prescription drug products for children, with the goal of removing the products from the market. (The review)

Today's topic.

Trump’s drug pricing order. On Monday, President Donald Trump signed an executive order aimed at lowering prescription drug prices for U.S. citizens by establishing “most-favored-nation pricing.” The order directs the secretary of Health and Human Services (HHS) to facilitate price targets for pharmaceutical companies, tying their prices to what consumers pay in other countries. “We’ve been subsidizing other countries throughout the world,” Trump said at a White House signing ceremony on Monday, adding that “some prescription drug and pharmaceutical prices will be reduced almost immediately by 50 to 80 to 90%.”

Back up: President Trump’s “most-favored nation” pricing would fix domestic prices for a consumer good to match the lowest price that good is sold for in another Organization for Economic Cooperation and Development (OECD) member country. President Trump signed a similar order in 2020, implementing most-favored-nation pricing for prescription drugs purchased by government programs like Medicare. The order was indefinitely paused following challenges in court, and the Biden administration formally revoked the rule in December 2021.

Additionally, the order also directs the secretary of Commerce and the United States Trade Representative to ensure that foreign nations do not engage in “practices that purposefully and unfairly undercut market prices and drive price hikes in the United States.” Trump said the order will apply to the commercial market as well as the public Medicare and Medicaid programs, but did not specify which medications it will affect.

HHS Secretary Robert F. Kennedy Jr. applauded the order, though he did not comment on when pharmaceutical companies might reduce their drug prices. “I think they're ready to figure out a way to get there, and they have advantages in this executive order because we got rid of the PBMs (Pharmacy Benefit Managers),” Kennedy said.

However, some industry professionals were skeptical that the order would lead to lower consumer drug prices. “We’re unlikely to get the drug companies to voluntarily decrease their prices, and we’re not going to get the other countries to voluntarily increase their prices,” Gerard Anderson, professor of health policy and management at Johns Hopkins, said.

President Trump’s order also faces scrutiny from some Republican lawmakers. Senate Majority Leader John Thune (SD) said a similar legislative plan would be “controversial,” while Senator Chuck Grassley (IA) instead expressed support for his own bill banning “deceptive and unfair pricing schemes” by PBMs. 

Today, we’ll cover what the right and left are saying about Trump’s executive order, then I’ll give “my take.”

What the right is saying.

• The right is mixed on the order, though many call it a common-sense proposal. 
• Some say the order amounts to price controls and won’t meaningfully address drug prices.
• Others argue the proposal supports free markets. 

In The American Spectator, Scott McKay said “Trump’s drug-price EO should have happened decades ago.”

“As Trump noted, practically every foreign country operates as a bulk buyer of pharmaceuticals, while the federal government in the U.S. does not. Neither Medicare nor Medicaid directly dictates drug prices for their enrollees in the way that foreign countries’ health bureaucracies do, and naturally, private health care plans don’t have the power to do anything of the sort,” McKay wrote. “What Trump is attempting to do is play the same game those countries play to cram down drug prices. That isn’t an assault on the free market. There is no free market in prescription drugs. Since World War II, it’s been a cartel market, and it’s simply been the American people getting hammered by it.”

“Free markets are a great thing. But with respect to pharmaceuticals, Americans have been forced to subsidize drugs for the rest of the world for decades and it’s been left to the Bernie Sanderses of the world… to complain about it while the rest of us are supposed to grin and bear it while Germans and Canadians get the same pills for a tiny fraction of what Ohioans and Arizonans pay,” McKay said. “The prescription drug market in the United States is $400 billion per year, and we are being grossly overcharged compared to the rest of the world. Cramming down those prices and resetting the global pharmaceutical market, while at the same time instituting some real reforms which de-cartelize that market, is an idea whose time should have come a long time ago.”

In Cato, Michael F. Cannon criticized Trump’s “price controls.”

“Trump’s executive order is a laundry list of coercive actions he plans to take against drug companies that do not make ‘significant progress’ toward his ‘price targets.’ HHS does not have the power to ‘impose’ price controls on private pharmaceutical purchases. If it did, some past administration already would have exercised that authority,” Cannon wrote. “But Trump might be able to impose price controls even without statutory authority. Congress has granted the executive branch so much power already, and so much discretion in using those powers, that the president may be able to claim this power that Congress never granted.”

“If Trump wants to reduce drug prices, there are several steps he can take and steps that he should push Congress to take. Price controls are never the answer,” Cannon said. “If Trump were serious about reducing drug prices, for example, he could unilaterally implement what I recommended late last year: ‘The administration should expand Executive Order 13938 [from July 2020] by directing the secretary to finalize a regulation that waives the prohibition on reimportation for all classes of drugs and devices from all Organisation for Economic Co-operation and Development member nations.’ That one measure would reduce the trade barrier that enables the very price discrimination that vexes Trump.”

In USA Today, Dace Potas argued “Trump's move to lower drug prices takes right approach.”

“Trump’s suggestions are warmly welcomed compared with the policies that many were bracing for over the weekend. When news came out that Trump was looking to attack prescription drug prices, I was nervous that the policy would come in the form of socialist price controls,” Potas wrote. “Price controls artificially reduce the incentive for companies to create a certain product, which inevitably leads to shortages. In the case of drugs, these shortages come in two forms: the actual supply of existing drugs and the research for innovations.”

“Drug companies have lobbied against market-based approaches that eat into their bottom line, including lifting import restrictions and reforming drug patents. Trump claims he is a man who cannot be bought, and if true, that makes him a perfect vessel to usher in policies that drug companies hate,” Potas said. “In addition to opening up drug imports, the Trump administration should look to other free-market solutions to bring down drug prices. More competition, rather than less, would be a great place to explore. Cutting red tape, lifting import restrictions and examining the terms of drug patents could bring drug costs more in line with those of other nations over the long term.”

What the left is saying.

• The left is mixed on the order, though many say it will not achieve what Trump hopes. 
• Some say the order is an encouraging first step but runs significant risks.
• Others suggest the action could actually lead to higher medication costs in the long run.

In MSNBC, Emma Freer said “Trump’s order on drug prices isn’t what it seems.”

“Trump is right that drug prices are too high. A January 2024 RAND study found that we pay nearly three times as much for prescriptions as other high-income countries… Trump is also right that Big Pharma plays a big role in this crisis. Manufacturers game the patent process for brand-name drugs to keep prices high and block more affordable generic and biosimilar options from coming to market,” Freer said. But “there is no way to lower drug costs for American patients without costing Big Pharma, whose executives can afford patio dinners at Mar-a-Lago and hefty donations to Trump’s inauguration fund.”

“So Trump’s order — so vaguely worded that it’s not clear if the rules would only apply to federal programs like Medicare and Medicaid or more broadly to commercial plans — ignores the greed inflating American pharmaceutical prices. His order, for example, has just about nothing to say about the role of PBMs,” Freer said. Additionally, “Trump’s order assumes Big Pharma won’t just choose to raise prices charged outside the U.S., bringing them more in line with the inflated prices we pay. It also assumes that Trump has the power to do all this — a very big if. Trump issued a similar executive order during his first term, but a federal judge blocked it for procedural reasons.”

The Bloomberg editorial board wrote about “how to cut US drug prices without hurting innovation.”

“Policymakers have spent decades trying to lower drug prices. Most have sought incremental reforms that fail to address the root of the problem: Thanks to an accident of history, most Americans get health insurance from their employers, not the government. As a result, the US is the only developed nation that doesn’t negotiate drug prices directly. Worried that a large government buyer would suppress innovation, Congress banned Medicare from bargaining over drug prices in 2003,” the board said. “To be clear, that concern was well-founded: High drug prices are one reason the US has become a global leader in medical innovation.”

“Yet the lack of a single government buyer has created two main problems. First, a web of middlemen has emerged to haggle on employers’ behalf… Second, negotiations between these middlemen and the industry have created multiple discount prices, which are guarded as confidential,” the board wrote. “So-called most-favored-nation pricing would prevent the drug industry from charging the US any more than the lowest of these prices. The potential benefits of MFN are twofold: Not only would it tend to lower US prices, but it would also help shift the cost of innovation by raising prices in other nations, all while moving toward a single transparent number… Of course, such a strategy could backfire. For particular drugs, prices might shift in unforeseen ways, and not necessarily to the US’s advantage.”

In his TFN newsletter, Jonathan Larsen argued “Trump's order lowering drug prices raises drug prices.”

“Out of some weird notion of fairness, Trump is pegging the cost of drugs here to the cost of drugs in Europe. (Never mind the disparity in pharmaceutical executive compensation.) In Trump’s framing — and Big Pharma’s — American consumers are subsidizing low European prices,” Larsen said. “Pharmaceutical companies will only do whatever research (‘innovation’) they can profit off of… Big Pharma gets you to subsidize research via the federal government, which they then cherry-pick for the most profitable market-winners.”

“It’s worth noting that no one is forcing drug companies to charge low prices in Europe, even if Trump does call it a ‘scheme,’ which is how you badmouth negotiating tactics you can’t or don’t want to use. If drug companies didn’t want to discount their products, and weren’t still making money off it, they’d just stop selling drugs there,” Larsen wrote. “But instead of doing what Europe does — y’know, negotiate better — Trump wants to preserve Big Pharma profits, and just source them more evenly. But Trump’s proposed system only works to Americans’ benefit if European prices remain low. Which they won’t if Trump’s order is carried out!”

My take.

Reminder: "My take" is a section where I give myself space to share my own personal opinion. If you have feedback, criticism or compliments, don't unsubscribe. Write in by replying to this email, or leave a comment.

• Partisans on both sides are struggling to adjust to President Trump ordering a typically leftist policy.
• The White House has identified a real problem, but I’m unsure if their solution will be effective.
• I support the government enacting policies to bring down drug costs, but I generally support free markets and favor policy through legislation.

Before getting to my policy analysis of the order, I want to call out the fascinating political dynamics at play.

Fixing drug prices, quite obviously, is a policy proposal you’d expect to come from the left. Toward the end of Biden’s term, it was a policy put forward by the left — and the commentary around it was robust. The ideological whiplash has caught many partisans off guard, and a seemingly infinite number of conservative, pro-Trump influencers have done a complete 180 on this kind of policy prescription now that Trump is proposing it. 

The whiplash is hitting liberal partisans, too. Here’s a note I woke up to from Tangle senior editor Will Kaback, who researches our political commentary every day: 

“Disappointingly, not many writers on the left have weighed in yet. Hard to understand why, as the drug pricing topic drove a ton of commentary toward the end of Biden's term, and the left was all over it. As I've looked through the opinion pages for left-leaning outlets the past week, there seems to be a new level of audience capture on display — just a total blanketing of Trump-bashing commentary and very little thoughtful consideration of issues like this (or Newark Mayor Ras Baraka's arrest, Trump's skinny budget, etc.).”

In other words, partisans on both sides are having a hard time choosing between defending their ideology and expressing their opinion of the president. Though it’s easy to empathize with that disorientation; it can be difficult for any of us to find our footing when Bernie Sanders, arguably the avatar for the modern left, is advocating for legislation to further the executive agenda of Donald Trump.

As for my policy analysis, I think these two things are true: 1) The Trump administration is identifying a very real problem, and using most-favored-nation pricing is not an unreasonable way to address it. 2) I am really unsure what the practical outcome will be.

The White House is right that the U.S. consumer generally pays more than three times as much for these drugs as citizens of other OECD countries. It is also correct to say that we effectively bankroll pharmaceutical research, development, and innovation for the rest of the globe. The pros of this arrangement are obvious: The U.S. market is the first to get incredible new breakthrough treatments, and we fund all kinds of jobs and research here in the U.S. The downside is what happens on the other end: American consumers bankroll that system, resulting in higher prices than the rest of the world pays. 

I am compelled by arguments like Scott McKay’s (under “What the right is saying”), in which he convincingly makes the point that we already don’t have a free market for drug prices. Trump is trying to play the same game other countries are already playing, which has helped keep their prices down. And here in the U.S., opaque negotiations over these prices allow pharmaceutical companies to distort normal free market dynamics in ways that benefit the corporations and crush American consumers. 

That leads me to the practical outcomes of Trump’s order. When President Biden allowed Medicare to negotiate prices for some of the drugs it covers, I laid out the many ways it could fail: it applied to a narrow scope of drugs, it didn’t address the role of pharmacy benefit managers (PBMs), and drug providers would find ways to make up lost revenue (such as simply raising prices in other countries). The first round of negotiations seemed to bear fruit, but the jury is still out on the policy approach as a whole. 

Trump’s order applies to more than just Medicare drug prices, and produces many of the same questions — and more. For instance, what constitutes a drug manufacturer making voluntary, "significant progress” on reducing their prices? How much will pharmaceutical companies have to reduce their prices towards most-favored-nation targets to avoid the government instituting a “rulemaking procedure” to ensure that they do so? What would such an enforcement process look like? 

Also, since the order doesn’t mention PBMs by name, how can Trump say it “cuts out the middlemen?” The answer to that question, at least, is more clear. Section 4 of the order directs the Health Secretary to “facilitate direct-to-consumer purchasing programs for pharmaceutical manufacturers that sell their products to American patients at the most-favored-nation price.” That’s at least enough to spook the industry, as shares of companies that operate PBMs sank on Monday. Health experts and pharmaceutical companies have long complained about the role of PBMs in driving up costs, and if Trump’s order is able to target them effectively, it would bring the U.S. more in line with peer countries. Of course, as with the rest of the order, Secretary Kennedy’s enforcement options are entirely unclear. 

And, perhaps most importantly, there’s the same question that applies to many of Trump’s other executive orders: Can he even do this? A similar order was indefinitely paused during Trump’s first term, and the pharmaceutical (and PBM) industry has a powerful lobbying arm which could compel a wave of lawsuits and snap Congress into slowing Trump down. 

To that point, we should also be asking why Trump pursued this action on his own rather than in tandem with Congressional Republicans. While executive orders can allow presidents to bypass Congressional gridlock, they are also significantly more vulnerable to such legal challenges and future reversals. Trump is once again trying to solve a problem via executive fiat, rather than doing the less glamorous and harder work of passing legislation in Congress. Like implementing tariffs or reducing government waste, the instinct to solve the issue by pushing the boundaries of executive power seems misguided and likely to fail.

I have two final points, one personal and one a broader note about the policy: 1) I’m generally a believer in the power of free markets, and I’m concerned about the impact this policy will have on innovation and research here in the U.S. But as I said above, we already don’t have a free market in drug pricing, so I’m open to the government taking sensible action to address our ridiculous drug prices. 2) Plenty of experts are warning that similar policies have been tried and failed throughout American history and could lead to critical drug shortages, which is a convincing point I can’t quite shake. So, as much as I believe Trump is aiming at the right target, it’d be foolish to pretend there isn’t any risk in taking this shot.

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Your questions, answered.

Q: A question I think many people may have: where do the tariffs the government is collecting go, exactly? I'm assuming into the Treasury, but what's the plan to spend all this extra money? Will it just go into the general budget planning, or be earmarked for something else?

— Laura from Michigan

Tangle: Yes, all of the tariffs the government collects go to the Treasury Department. As with other tax revenue, tariffs are deposited into the Treasury’s general affairs budget, which finances employee salaries, infrastructure maintenance, and government goods and services. From there it can be used “essentially for anything,” according to Felix Tintelnot, an associate professor of economics at Duke University. 

Tariff revenues rose 14% from February to March ($7.68 billion to $8.75 billion), and then nearly doubled in April to an all-time high of $16.3 billion. And since the revenue the Treasury reports has a one-month lag, that number likely does not include much of the revenue collected from tariffs on China — a figure that became as steep as 145% and, though it has come down to 30%, is still historically high.

That’s all to say that the Treasury Department is indeed collecting more money from tariffs, is still collecting that money, and is set to collect even more. And although the extra revenue is much more than the government had previously collected through tariffs, it’s not exactly cash on hand, either.

The federal government is still running a spending deficit of over $1 trillion so far this fiscal year, and although the government is collecting significantly more tax revenue through tariffs, that revenue won’t correct the imbalance by itself. If the Trump administration were able to cut enough spending and raise enough revenue to record a budget surplus, they would likely do what the Clinton administration did the last time the government ran a surplus from 1998 to 2001: put it towards decreasing our national debt.

Want to have a question answered in the newsletter? You can reply to this email (it goes straight to our inbox) or fill out this form.

Under the radar.

As the United States and Canada seek a new trade deal, the future of a 60-year-old treaty that defines water management responsibilities for the Columbia River is also in question. The river runs from British Columbia through Montana, Idaho, Washington and Oregon, providing the single largest source of hydropower in the United States. Parts of the existing treaty expired shortly before the 2024 presidential election, and negotiations broke down after President Trump took office and began suggesting Canada should become the 51st U.S. state. If a new agreement is not reached, regional hydropower production could become less predictable, according to a recent nonpartisan congressional report. A spokesman for British Columbia said there has been no movement in negotiations since the U.S. State Department paused the discussions as part of a broad review of international commitments. The New York Times has the story.

Numbers.

• $989 billion. The estimated total prescription drug spending worldwide in 2022. 
• 62%. The percentage of total prescription drug spending in 2022 accounted for by the United States.
• 7%. The percentage of U.S. prescription drug volume accounted for by brand-name originator drugs in 2022. 
• 87%. The percentage of total U.S. prescription drug spending accounted for by brand-name originator drugs in 2022.
• 2–4x. The average cost multiplier paid at the retail level by consumers and other payers in the United States for 20 selected brand-name prescription drugs compared to buyers in Australia, Canada and France, according to a 2021 US Government Accounting Office report.
• 61%. The percentage of U.S. adults who say they are taking at least one prescription medication, according to a July 2023 KFF poll.
• 73%. The percentage of U.S. adults who say there is not as much government regulation as there should be to limit the price of prescription drugs. 
• 82%, 67%, and 68%. The percentage of Democrats, independents and Republicans, respectively, who say there is not as much government regulation as there should be to limit the price of prescription drugs.

The extras.

• One year ago today we wrote about the bird flu.
• The most clicked link in yesterday’s newsletter was our link to Straight Arrow News.
• Nothing to do with politics: How flamingos create tiny water tornadoes to catch their prey.
• Yesterday’s survey: 4,074 readers answered our survey on Isaac’s take on Qatar’s Air Force One gift to Trump with 93% in agreement. “I don’t think any gift from a foreign gov/company should be taken at face value, there are always motives. Not to mention the inherent security risks that could be embedded in said plane,” one respondent said.

Have a nice day.

Animal-lover and rising star pitcher for the Seattle Mariners Andrés Muñoz auctioned an experience package to raise funds for the Seattle Area Feline Rescue. The package includes passes to batting practice, game tickets, and a meet-and-greet with Muñoz. The pitcher’s love of animals comes from his 14-year-old Persian rescue cat, Matilda, who regularly goes on Mariners road trips. “Pets give you a lot of happiness,” Muñoz said. “That is why it’s really important for me.” The Seattle Times has the story.

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