President Donald Trump signed an executive order aiming to overhaul pharmaceutical pricing practices, targeting international systems that he argues burden American consumers with the highest drug prices globally. The new order mandates that U.S. pharmaceutical prices be aligned with the lowest prices in economically similar countries, with penalties for non-compliance. This bold action seeks to address the significant price gap between the U.S. and other nations while threatening pharmaceutical companies with federal intervention if they fail to comply.
Trump’s Bold Executive Order Aims for Price Equality
In a major push to reduce prescription drug costs, President Trump signed an executive order on Monday to dismantle foreign pharmaceutical pricing practices. The directive seeks to lower the prices Americans pay for medications by as much as 90%, aiming to match U.S. prices to those found in economically similar countries. This new approach follows the “Most Favored Nation” (MFN) principle, which mandates that drug companies cannot charge the U.S. more than the lowest price offered in comparable markets abroad.
Trump’s executive order applies to both government health programs like Medicare and Medicaid as well as the commercial drug market. The President called the order a necessary step to prevent U.S. consumers from subsidizing the drug costs of other nations. “We will no longer pay for other nations’ healthcare,” Trump said, signing the directive at the White House.
Impact on Pharmaceutical Companies
Pharmaceutical companies are now under pressure to comply with this new pricing strategy. Trump emphasized that companies must align their prices with the lowest international rates or face significant consequences, including potential federal enforcement. The Department of Health and Human Services (HHS) has been instructed to establish price benchmarks within 30 days. If companies do not comply voluntarily, HHS will draft new policies, including expanded legal imports of drugs and possibly revoking approvals for unsafe or improperly marketed medications.
However, critics of the plan raise concerns about its feasibility and legality. The Most Favored Nation approach had previously faced legal challenges during Trump’s first term, particularly regarding its application within Medicare. That attempt was blocked by court rulings and later reversed by President Joe Biden. With this new executive order, Trump aims to broaden the scope of the MFN principle to cover the entire pharmaceutical sector.
Pharmaceutical Industry Pushback
The pharmaceutical industry quickly voiced opposition to the new pricing model. The Pharmaceutical Research and Manufacturers of America (PhRMA), the leading industry lobbying group, has strongly condemned the proposed changes. PhRMA’s CEO, Stephen Ubl, warned that implementing MFN pricing in the U.S. could hurt the industry’s ability to innovate and create jobs. “Adopting foreign-set prices threatens American jobs and future medical innovations,” Ubl stated.
Financial analysts also expressed doubts about the executive order’s potential to bring about meaningful change. Evan Seigerman of BMO Capital Markets labeled the action as symbolic rather than transformative. He pointed out that true reform would require Congressional approval and noted the legal uncertainty surrounding the MFN pricing model.
Global Pricing Practices Under Scrutiny
Trump’s new executive order comes as the U.S. continues to grapple with significantly higher drug prices compared to other nations. A 2022 report from HHS found that U.S. prices for prescription drugs were nearly three times higher than those in other developed countries. Brand-name medications were particularly expensive, with prices exceeding those of other countries by more than 3.2 times, even after factoring in rebates.
The executive order’s aim is to tackle this disparity by pressuring pharmaceutical companies to bring down prices and align them with international standards. Trump’s administration has also emphasized the importance of eliminating the influence of middlemen in the pharmaceutical pricing process. The order includes provisions to allow Americans to purchase medications directly from manufacturers, bypassing pharmacy benefit managers who are often accused of driving up costs.
Tensions with the European Union
Trump’s order also targets international trading practices, particularly in Europe. He accused the European Union of pressuring drug manufacturers to sell medications at lower prices, claiming that this unfairly burdens American consumers. “Those countries, like those in the EU, must stop,” Trump said, suggesting that trade with European nations posed more challenges than relations with China.
As part of his broader strategy, Trump has also floated the idea of imposing tariffs on pharmaceutical imports. While some experts warn that this could lead to shortages of generic drugs and increased prices domestically, the White House remains committed to pushing for reforms that ensure fairer pricing for U.S. consumers.
Next Steps and Future Plans
While the new executive order is set to make waves, it remains unclear when American consumers will begin to see the promised reductions in drug prices. On social media, Trump promised significant price cuts, stating that prescription drug costs could drop by as much as 59%. However, he provided no clear timeline for when these changes might take effect.
The White House has made it clear that the government will take further actions if drug prices do not decrease quickly enough. This includes working with the U.S. Trade Representative and the Department of Commerce to prevent foreign pricing practices that result in higher drug prices in the U.S. Trump also reaffirmed his commitment to the MFN policy, vowing that the U.S. would not pay more than the lowest global price for medications.
President Trump’s executive order marks a significant step toward addressing the high cost of prescription drugs in the U.S. by pressuring pharmaceutical companies to adopt more competitive pricing models. While the order is expected to face opposition from the pharmaceutical industry, it sets the stage for potential changes in both domestic and international drug pricing practices. As the administration moves forward with these reforms, the future of drug pricing in the U.S. may see a shift toward greater price transparency and fairness.