Trump's "Most-Favored-Nation" Drug Pricing Order Could Slash Costs by 80% Despite Industry Pushback
The sweeping executive order aims to align U.S. pharmaceutical prices with lower international rates, but faces significant legal and operational hurdles as pharmaceutical companies warn of innovation impacts
President Donald Trump signed an executive order Monday mandating that Americans pay no more for prescription drugs than patients in other developed nations, potentially slashing pharmaceutical costs by 30% to 80%. The "most-favored-nation" pricing approach represents one of the most aggressive attempts to tackle high drug prices in the U.S., where consumers typically pay nearly three times more than patients abroad for identical medications, often manufactured in the same facilities.
Key Developments in Trump's Drug Pricing Plan
The executive order, titled "Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients," establishes a 30-day deadline for the Department of Health and Human Services to communicate price targets to pharmaceutical manufacturers. The order applies to medications covered under Medicare and Medicaid as well as those offered through private insurance The Hill1.
"Americans will no longer be forced to pay almost three times more for the exact same medicines, often made in the exact same factories," Trump declared in the order The White House2.
The plan directs the Secretary of Health and Human Services to work with the Centers for Medicare and Medicaid Services (CMS) to establish pricing targets based on the lowest prices paid in comparably developed countries. If pharmaceutical companies fail to make "significant progress" toward these targets, the administration has outlined a series of escalating measures, including potential regulatory actions to facilitate drug importation, antitrust enforcement, and reviews of FDA drug approvals The White House2.
In addition to the pricing order, Trump signed a separate executive order on May 5 focused on reducing regulatory barriers to domestic pharmaceutical manufacturing. This complementary action directs the FDA, EPA, and Army Corps of Engineers to streamline permitting and review processes for pharmaceutical manufacturing facilities within 180 days whitehouse.gov3.
Industry Reaction and Political Divide
The pharmaceutical industry has responded with strong opposition to the pricing order. The Pharmaceutical Research and Manufacturers of America (PhRMA) warned that the policy "would mean less treatments and cures and would jeopardize the hundreds of billions our member companies are planning to invest in America—threatening jobs, hurting our economy and making us more reliant on China for innovative medicines" Bloomberg Law4.
Stephen J. Ubl, president and CEO of PhRMA, emphasized that "importing foreign prices from socialist countries would be a bad deal for American patients and workers," and noted that pharmacy benefit managers (PBMs), insurers, and hospitals already capture 50 percent of every dollar spent on medicines The Hill1.
Republican lawmakers have expressed mixed reactions. Senate Majority Leader John Thune and Senate GOP Whip John Barrasso cautioned that government-directed drug pricing could hamper innovation and restrict patient access to new therapies. Thune characterized the executive order as "fairly controversial" if it were to be translated into legislation The Hill1.
Meanwhile, Senate Judiciary Committee Chair Chuck Grassley has advocated for his own bill targeting "deceptive and unfair pricing schemes" by pharmacy benefit managers rather than directly regulating drug prices The Hill1.
Expert Insights on Implementation Challenges
Despite the ambitious goals of the executive order, experts point to significant legal and operational hurdles that could impede its implementation. A similar approach attempted by Trump in 2020 was struck down by a federal judge for failing to follow the required notice-and-comment rulemaking procedure and was later abandoned by the Biden administration in 2022 Bloomberg Law4.
Critics have noted that the current order contains "a lot of bluster with limited meat on the bone in terms of what they're actually planning to do," particularly regarding the legal authority the administration will use Bloomberg Law4.
Pharmaceutical investors appear to share this skepticism. Despite the potentially disruptive nature of the policy, biotech stocks actually rose on the day of the announcement, with the XBI biotech index climbing over 4%, suggesting that the market has either already factored in the policy or remains doubtful about its successful implementation STAT News5.
AstraZeneca emphasized the need for "thorough stakeholder engagement and robust systems to avoid... disrupting patient care" if the policy moves forward Bloomberg Law4.
Potential Economic and Health Impacts
Trump has ambitiously projected that the policy could generate savings of 30% to 80% on pharmaceutical costs, with Medicare and Medicaid expenditures potentially reduced by "hundreds of billions of dollars" The Hill1. Such dramatic price reductions would significantly impact both public healthcare programs and private insurance costs.
However, industry representatives and some lawmakers warn of unintended consequences. John Stanford, executive director of Incubate Coalition, cautioned that "importing foreign price controls is a step backward for American innovation, and American patients," implying that government-imposed price caps could reduce investment in research for diseases like cancer and Alzheimer's Bloomberg Law4.
The economic ramifications extend beyond drug prices. Pharmaceutical companies warn that reduced profits could jeopardize R&D investments and potentially lead to job losses in the sector. This tension highlights the complex balance between making medications affordable and maintaining the innovation ecosystem that produces new therapies The Hill1.
The Path Forward for Drug Pricing Reform
The most-favored-nation pricing approach represents the latest attempt to address the persistently high cost of prescription drugs in the United States. As the 30-day deadline approaches for setting price targets, all eyes will be on how pharmaceutical companies respond and whether legal challenges materialize.
The dual approach of pricing regulations coupled with regulatory relief for domestic manufacturing suggests a strategy aimed at both reducing costs and strengthening U.S. pharmaceutical production capacity. The May 5 regulatory relief order directs federal agencies to streamline processes for domestic pharmaceutical manufacturing within specific timeframes: 90 days for enhancing FDA foreign facility inspections and 180 days for the FDA, EPA, and Army Corps of Engineers to review and update relevant regulations whitehouse.gov3.
In the coming weeks, the administration will need to navigate complex legal requirements for implementing such significant changes to drug pricing mechanisms. Previous experience suggests that procedural compliance will be crucial for the policy to withstand legal scrutiny.
As this high-stakes battle over drug prices unfolds, will the Trump administration successfully implement a policy that dramatically reduces pharmaceutical costs for Americans, or will legal and political obstacles once again derail attempts to fundamentally reform how the nation pays for prescription medications?
