President Trump has unveiled a plan that he says will dramatically reduce the price Americans pay for prescription drugs, but whether he can deliver on that promise is very much murky.
On Monday, the president signed an executive order aimed at making pharmaceutical companies charge their US customers no more than the lowest cost offered to buyers in other developed countries. The so-called “most favored nation” proposal is effectively a revamped version of an idea Trump tried to roll out late in his last term, only to see it halted by the courts.
Flanked by his administration’s top health officials, Trump told a crowd of reporters that the price of some drugs could come down immediately by between 50% and 90%, and that the US would no longer be in the business of subsidizing the rest of the world’s healthcare systems.
“Whoever is paying the lowest price, that is the price we’re going to get,” he said.
But for now, the order raises “more questions than answers,” said Tricia Neuman, a senior vice president at the health policy think tank KFF.
“There’s a lot involved in getting from an executive order to an operational program,” she said. “So it’s not clear if this will be broad and sweeping, or have a more limited impact. And it’s highly likely that the pharmaceutical industry will move heaven and earth to block implementation through the court.”
What the order does
Patients have long paid vastly more for prescription drugs in the US than in other countries, where pharmaceuticals are much more tightly regulated or national health plans use their power to hold the line on costs. Under the Biden administration, Medicare began negotiating prices on a handful of medications for the first time. But so far, the government has agreed to accept price tags significantly higher than companies charge abroad — a point Trump brought up in his remarks Monday.
Drug makers have often argued that the high prices Americans pay for medicines are essential for covering the massive research and development expenses necessary to bring new treatments to market, since other countries refuse to spend more. They’ve also warned that pushing down US prices could threaten patient access.
In his speech Monday and his executive order, Trump promised to take several steps to try and bring US costs in line with other countries, using a combination of presidential carrots and sticks.
According to the order, administration officials will first meet with pharma executives and urge them to voluntarily adopt most-favored-nation pricing. If that doesn’t work, the secretary of Health and Human Services will then propose new regulations to force the price cuts by fiat, while taking steps to make importing discount drugs from other countries easier.
Much of Trump’s plan is also focused on forcing other developed countries to pay more for drugs so that the US is less responsible for propping up the industry and its R&D costs. On Monday, he said he would order his administration to begin investigations into countries “that extort drug companies by blocking their products unless they accept … very low dollar amounts for their product, unfairly shifting the cost burden onto American patients.” He also seemed to suggest the issue would feature prominently in tariff negotiations with Europe.
“We’re going to tell those countries, like those represented by the European Union, that that game is up, sorry,” he said, referring to their drug pricing plans. “And if they want to get cute, they don’t have to sell cars into the United States anymore.”
What happened last time
How feasible all this may be is unclear.
In 2020, Trump attempted to implement a much more narrow most-favored-nation drug pricing plan that would have only affected drugs given to hospital patients through Medicare Part B. That effort came under immediate legal fire from the pharma industry and was blocked from going into effect by federal judges, who issued preliminary injunctions after finding the government had skipped over necessary procedural steps. The Biden administration later withdrew the proposal and pursued its own drug pricing reforms instead.
Trump administration officials expressed optimism on Monday that pharmaceutical executives would cooperate with their plans this time around. “They're patriotic Americans,” said Centers for Medicare and Medicaid Services head Mehmet Oz. “They want what's right.”
But the industry’s response so far has been less than enthusiastic. The trade group PhRMA issued a statement praising the administration for planning to make drug spending an issue in tariff negotiations but warning against trying to force down prices.
“Importing foreign prices from socialist countries would be a bad deal for American patients and workers,” it said. “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.”
Any attempt to create a most-favored-nation system through regulations would likely trigger new lawsuits too. In 2020, the Trump administration attempted to implement its plan using its power to run small demonstration projects meant to experiment with new pricing schemes under Medicare and Medicaid. In their lawsuits, drug makers argued that authority didn’t give the president the power to entirely rewrite how Medicare pays for drugs.
Though that issue was never settled in court, companies could raise similar arguments if Trump tries to issue new regulations. The executive order did not cite specific legal authorities that the administration would lean on to implement its most-favored-nation proposal.
Still, Trump may have some openings to pursue this plan. The president could use the current round of Medicare drug price negotiations to seek most-favored-nation pricing, for instance. He also appears ready to use hardball tactics with pharma companies that resist the plan, including potentially reviewing and revoking old approvals of drugs — a potential step that’s laid out in his executive order.
It’s unclear if Trump has any plans to work with Congress on the issue. In his remarks Monday, the president said he told House Speaker Mike Johnson that he would need to include the savings from his prescription drug plan as they score the cost of their monster-sized tax and budget bill. But the executive order makes no mention of legislation. With some exceptions, GOP lawmakers have traditionally opposed attempts to force down drug costs, deriding them as “government price controls.”
Jordan Weissmann is a Senior Reporter at Yahoo Finance.
