President Donald Trump will sign an executive order Monday to link the cost of drugs to prices abroad, under a so-called “most favored nation” policy, through a broader set of actions than during his first term.
The order is controversial and could earn swift pushback, and likely legal challenges, from the pharmaceutical industry, insurers, providers and pharmacy benefit managers. Executive orders are directives that signal future intent but don’t override federal law.
Trump, in a Truth Social post over the weekend, said it would be “one of the most consequential Executive Orders in our Country’s history,” reducing prices by 30% to 80% “almost immediately.” A following post said prices would be cut by 59%.
His plan is anticipated to impact prices across the Medicare, Medicaid and commercial markets, according to White House officials.
"Basically, what we're doing is equalizing," said Trump during an early morning press conference. "We're going to equalize, where we're all going to pay the same."
The strategy is multipronged.
The Office of the U.S. Trade Representative and the Department of Commerce will be expected to take action against "unreasonable and discriminatory" policies in foreign countries. The Department of Justice and the Federal Trade Commission will be tasked with rooting out anticompetitive behaviors by addressing various patent practices, pay-for-delay agreements and inaccurate Food and Drug Administration Orange Book listings. And the Department of Health and Human Services will try to cut deals with drugmakers to lower prices within 30 days.
If drugmakers do not agree to lower prices to a most favored nation target, there will be future rulemaking impacting federal programs and actions including drug importation.
“There will be a particular focus on drugs where there is the largest disparities and the largest expenditures,” an official told members of the press. “It would be fair to expect that GLP-1s, given that they hit both of those categories, will be a focus there.”
The stock prices for prominent drugmakers like Eli Lilly, Pfizer, AstraZeneca and GSK are up at the time of publication. The market at large is also up on news of a temporary tariff cutback between the U.S. and China.
Jeff Jonas, a portfolio manager at healthcare investment firm Gabelli Funds, said the executive order is lacking a detailed plan.
"There is still not a lot of detail on the specifics here, pending a 30-day negotiating period with the industry," he said. "I’m skeptical that this will ever happen, given Trump’s first attempt at this and how Congress just rejected adding it to the reconciliation bill. I also think it’s hard to get Europe to increase their prices given their budget situations and defense spending needs."
In certain respects, this movie has already played out once. The Trump administration vouched for a more limited approach in 2018. Critics—including some Republicans—believed the plan, to eliminate the safe harbor shielding Part D rebates from the anti-kickback statute and tie Part B drug prices to those paid by countries overseas, was a price control scheme that would raise premiums for Part D seniors.
Trade group PhRMA estimated a most favored nation policy would cost manufacturers up to $1 trillion over the next decade, reported Bloomberg. But a statement released Monday was diplomatic in tone.
"The administration is right to use trade negotiations to force foreign governments to pay their fair share for medicines," said a PhRMA spokesperson in a statement to Fierce Healthcare. "U.S. patients should not foot the bill for global innovation.
"Importing foreign prices from socialist countries would be a bad deal for American patients and workers," the spokesperson added. "It 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.”
After the first Trump administration stressed how patients would see lower drug prices like other countries and finalized a rule to implement a pilot payment model in the term's waning months, a judge blocked the rule and the Centers for Medicare & Medicaid Services later rescinded the regulation during President Joe Biden’s term.
Biden ultimately signed the Inflation Reduction Act into law, which created the Part D drug price negotiation program. Trump said the goal was “commendable” but is seeking public comment to modify the program, he said in an executive order last month.
Now, Trump is positioning himself as a fighter against the pharmaceutical industry and impervious to lobbying influence, ahead of a legislative fight that could see Republicans back cuts to Medicaid and increase the uninsured rate. Republicans in Congress opposed including the most favored nation policy within an already sprawling reconciliation bill containing an assortment of healthcare priorities.
“We are going to do the right thing, something that the Democrats have fought for many years,” he said on Truth Social.
The policy is not akin to price controls, White House officials said, because the policy is just designed to fix the market and give price relief to the American people. Additionally, other countries will be expected to pay more and contribute to research and development, which Trump described as a false reason drugmakers have given for charging higher prices domestically than overseas.
"They had to be borne by America alone," he said. "Not anymore."
Further, officials sidestepped questions on tariffs, and whether the U.S. would not impose tariffs on countries if pharmaceutical deals with manufacturers are reached.
Over the weekend, an outline for a trade deal between the U.S. and China was announced. Trump said the reduced tariffs will not include tariffs that may be imposed on pharmaceutical drugs.