Clinton outlined a plan that would reform the way drug companies do business, particularly by stopping them from spending government grants on advertising and by allowing Medicare -- and the U.S. government -- to negotiate down prescription drug costs.
"Under my plan, drug companies who want to keep getting federal support will have to redirect more of their profits into meaningful investments in research and development," Clinton said at a community forum in Iowa. "That will mean more breakthroughs, more good drugs, not fewer."
Clinton has made prescription drug costs part of her regular stump speech of late, telling audiences in New Hampshire, Iowa and elsewhere that getting costs under control would be a key part of her plan to "build on" the Affordable Care Act, President Barack Obama's landmark health care law.
The drug prices plan also "would eliminate corporate write-offs for direct-to-consumer advertising" that "can include confusing, misleading or incomplete information or exaggerated claims if not regulated effectively," according to the fact sheet.
Tuesday's announcement tracks with what Clinton has said about Obamacare in the past: She supports the law, but feels tweaks and changes are needed.
"As president, I want to go further. I want to strengthen the Affordable Care Act," she said Tuesday. "The truth is it couldn't and didn't solve all of our problems."
Clinton's new plan will also tweak Obamacare's mandate on insurance companies, requiring that they limit the amount of money someone can spend monthly on prescription drugs to $250.
Large insurance and biotech companies did not welcome the announcement.
"Secretary Clinton's proposal would turn back the clock on medical innovation and halt progress against the diseases that patients fear most," said John J. Castellan, CEO of the trade group PhRMA.
Marilyn Tavenner, CEO of America's Health Insurance Plans, didn't mention Clinton, but said "recent proposals" would "impose arbitrary caps on insurance coverage or force government negotiation on prescription drug prices will only add to the cost pressures facing individuals and families across the country."
To get drug prices down, Clinton would bank on the federal government's large purchasing power to influence drug companies to provide higher rebates to Medicaid and would allow programs like Medicare to negotiate with pharmaceutical companies as a single 40 million person entity, rather than a series of smaller groups.
On Tuesday, Clinton said it "makes no sense" that Medicare was legally not allowed to negotiate as one entity.
"I have been fighting to change this law for years and as president, I will get it done," she said.
Clinton previewed her plan briefly on Twitter Monday, saying that "price gouging like this in the specialty drug market is outrageous."
The tweet reverberated on Wall Street, causing biotech stocks to tumble
As she rolled out her plan in Iowa, Clinton's closest Democratic opponent, independent Vermont Sen. Bernie Sanders, rolled out his own prescription drug proposal, calling for more transparency on pricing and for allowing Americans to import drugs from Canadian pharmacies.
"The pharmaceutical industry has become a health hazard for the American people," Sanders said in a statement. "The time is long overdue for Congress to listen to the needs of the American people and not the enormously-profitable pharmaceutical industry."
Like Clinton's plan, Sanders' proposal would allow Medicare to bargain directly with drug companies. But it would also require drug companies to report information that impact their prices and increase the penalties against drug companies convicted of fraud.
Sanders would also require generic drug companies to rebate money to the government if their prices go up higher than inflation, a seemingly direct shot at Turing Pharmaceuticals, a company that recently raised the price on a drug that fights parasitic infections and is used by some AIDS and cancer patients, by over 4,000%.
In Iowa, Clinton said what Turing did was "price gouging. Pure and simple." When company CEO Martin Shkreli announced later Tuesday that he was going to lower the $750 drug to a "more affordable" price, Clinton simply tweeted, "Good."