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Over the weekend, President Donald Trump announced that his administration would tackle rising drug costs in the United States by establishing “most favored nation” pricing, which would base the U.S. prices of pharmaceuticals on the lowest prices paid by other foreign nations. On Monday he signed an executive order with a lot less teeth than he had suggested it would have. A similar proposal Trump announced during his first term, aimed specifically at reducing drug prices under Medicare, faced strong opposition and legal challenges from pharmaceutical companies — and was ultimately defeated in court. Here are the biggest questions surrounding Trump’s latest executive order.
What did Trump say he was going do?
After teasing a “very big announcement,” Trump revealed over the weekend that he would be signing what he deemed “one of the most consequential Executive Orders in our Country’s history,” which would dramatically decrease the cost of pharmaceuticals and prescription drugs in the United States by a range of 30 percent to 80 percent. The order would tie the pricing of pharmaceuticals in America to the often lower cost of those same drugs in other countries overseas. In a Truth Social post, the president said drug costs will rise in other countries throughout the world “in order to equalize and, for the first time in many years, bring FAIRNESS TO AMERICA!”
“I will be instituting a MOST FAVORED NATION’S POLICY whereby the United States will pay the same price as the Nation that pays the lowest price anywhere in the World,” Trump said.
What does Trump’s executive order actually say?
The ultra-consequential executive order Trump teased on Sunday is not what he signed on Monday. Instead, Trump asked drugmakers to voluntarily reduce their prices, said he would pressure foreign governments to pay more for their drugs, and broadly threatened to take further action if drug prices don’t come down.
The executive order directs Health and Human Services secretary Robert F. Kennedy Jr., along with other top federal health officials, to “communicate most-favored-nation price targets to pharmaceutical manufacturers to bring prices for American patients in line with comparably developed nations” within 30 days.
Trump also directed Kennedy to “propose a rulemaking plan to impose most-favored-nation pricing” if drug prices don’t go down. The HHS secretary is to facilitate direct-to-consumer purchasing for those manufacturers by cutting out pharmacy-benefit managers. And Trump directed his administration to look at importing drugs from abroad as a way to pressure drugmakers.
Additionally, the order directs the secretary of Commerce and the United States Trade Representative to take action to ensure that foreign nations are not taking part in any “unreasonable or discriminatory” action or policy that may result in “suppressing the price of pharmaceutical products below fair market value.”
So Trump threatened to use U.S. trade policy to help drugmakers make more money in Europe.
Will Trump’s executive order lower drug prices?
It’s hard to see how it will. The order, which will undoubtedly face opposition and lawsuits from the pharmaceutical industry, doesn’t offer much in the way of detailed plans for achieving its aims, nor does it outline a legal rationale for enacting price controls without Congress (and there has never been much support for drug-price controls among Republicans in Congress).
Is anyone taking Trump’s executive order seriously?
Investors seem to have mostly shrugged off Trump’s plan. Many biotech and big-pharma stocks rose after the actual executive order came out on Monday.
Senator Bernie Sanders, who has been fighting to lower drug prices in the U.S. for most of his career, was not impressed and predicted that Trump’s executive order would die in court:
If Trump is serious about making real change rather than just issuing a press release, he will support legislation I will soon be introducing to make sure we pay no more for prescription drugs than people in other major countries. … Let’s be clear: The problem is not that the price of prescription drugs is too low in Europe and Canada. The problem is that the extraordinarily greedy pharmaceutical industry made over $100 billion in profits last year by ripping off the American people. Further, as Trump well knows, his executive order will be thrown out by the courts.
The Wall Street Journal’s editorial board rejected the idea of “most-favored nation” drug prices in an op-ed last week that ran with the headline “Trump’s Worst Idea Since Tariffs”:
Trump officials are pitching Republicans on a “most-favored nation” drug-pricing regime for Medicaid. While the details are hazy, the idea is for Medicaid to pay drug makers the lowest price charged by other developed countries. Mr. Trump proposed a similar scheme for Medicare Part B drugs at the end of his first term, and it was a bad idea then too.
Though drugmakers are still waiting to see whether Trump pursues actual policy changes, the pharmaceutical industry seems poised to oppose any substantive efforts. The Associated Press reports that Pharmaceutical Research and Manufacturers of America, a top lobbying group for the industry, issued a statement denouncing the most-favored-nation policy as potentially harmful. “Importing foreign prices will cut billions of dollars from Medicare with no guarantee that it helps patients or improves their access to medicines,” Stephen J. Ubl, the PhRMA president and CEO, said in a statement. “It jeopardizes the hundreds of billions our member companies are planning to invest in America, making us more reliant on China for innovative medicines.”
What happened the last time Trump tried to do this?
It failed. In 2018, the Trump administration issued a proposal to have Medicare pay for drugs based on the lowest prices paid by other foreign nations with the goal of decreasing costs for American consumers. “Nobody’s had the courage to do it, or they just didn’t want to do it,” Trump said at the time, per the New York Times.
However, the plan was immediately dogged by opposition from pharmaceutical companies with Ken Frazier, the then-CEO of Merck, saying at the time that legal challenges would likely emerge if the federal government were to adopt the rule. In 2020, a federal judge rejected a rushed late-stage attempt to push the “favored nations” regulation through before the end of Trump’s first term, claiming the administration did not allow enough time for public comment, as required by law.
