Trump orders drug price reductions
Is Trump’s order to implement “most-favored-nation” drug pricing the right move? Viewpoints from multiple sides.
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Snippets
The House of Representatives passed the One Big Beautiful Bill Act, a broad tax and spending bill backed by President Trump that would extend tax breaks, boost funding for border security, and cut spending for some social programs like Medicaid. The legislation has advanced to the Senate, where it is expected to face revisions.
A federal judge blocked the Trump administration’s attempt to restrict Harvard University from enrolling international students. The administration had moved to terminate Harvard’s Student and Exchange Visitor Program certification in an escalation of its standoff with the university around campus policies. (See our previous coverage.)
Federal prosecutors are investigating the fatal shooting of two Israeli Embassy staff members outside the Capital Jewish Museum in Washington, DC as a hate crime and an act of terrorism. The suspect was charged with first-degree murder.
The Supreme Court deadlocked over a Catholic virtual charter school’s bid to become the nation's first public religious charter school. The split means an Oklahoma Supreme Court ruling blocking the school’s attempt remains in place. (See our previous roundup coverage.)
Humanitarian aid entered Gaza for the first time since early March after Israel eased an 11-week blockade, enabling 90 truckloads of aid to pass.
What’s happening
Last week, President Trump signed an executive order to establish “most-favored-nation” (MFN) pricing on pharmaceutical drugs for Americans. MFN pricing aims to tether American drug prices to those paid in similar developed nations, which commonly see lower prices than those charged in the US by the same manufacturers. The order took effect immediately although its enforcement timeline is not yet clear.
The Department of Health and Human Services (HHS) further specified this week that pharmaceutical manufacturers are expected to meet a US price target that matches the lowest paid by any OECD country with a GDP per capita of at least 60% that of the US.
Drug price disparities: When highlighting drug cost disparities globally, observers across the spectrum have pointed to a 2024 RAND study that found gross prices for all prescription drugs in the US were 278% of prices in other OECD countries. Brand-name pharmaceuticals, according to the study, are the biggest driver of the price disparity, with their US costs estimated at 422% of prices in OECD countries.
The order: The order specifically directs HHS to create rules imposing MFN pricing on manufacturers or “take other aggressive measures” to reduce drug costs if “significant progress” is not made by pharma companies in meeting communicated price targets.
It also instructs the Secretary of Commerce and US Trade Representative to ensure no foreign countries are purposefully undercutting US drug prices and requires HHS to set up a system enabling Americans to buy drugs directly from manufacturers.
Previous executive action: During his first term in 2020, Trump signed an executive order calling for a similar plan that would enable Medicare to pay MFN pricing for specific drugs covered under Medicare Part B and Part D. This led to the conception of the “MFN Model,” but the order was blocked by a federal judge before the plan could take effect.
More recently in April, Trump signed an order directing federal agencies to evaluate potential anti-competitive practices by drugmakers and explore ways for states to import lower-cost drugs from Canada.
The conversation around Trump’s latest MFN pricing order centers around its potential to reduce drug prices and the tradeoffs involved in mandated drug price reductions. This week, we bring you the viewpoints from multiple sides. Let us know what you think.
Notable viewpoints
More supportive of Trump’s order:
Government-led drug price reductions are popular and common globally.
Most Americans support government-led intervention on prescription drug price costs. A 2024 poll by the Kaiser Family Foundation (KFF) found that 55% of adults are worried about their ability to afford their family’s prescription drug costs, and a 2023 KFF poll found that 73% of adults say “there is not enough government regulation when it comes to limiting the price of prescription drugs.”
Many other foreign governments already impose price controls on pharmaceutical purchases – commonly in the form of bulk buying – including France, Germany, and the UK. Trump’s order seeks to put the US on the same playing field as the rest of the world.
Lowering drug prices will improve patient outcomes.
High drug prices lead to worse patient outcomes. A 2023 KFF poll found that 31% of American adults did not take their medicine as prescribed due to cost and a 2020 study by West Health Policy Center estimated that 1.1M+ Medicare patients could die between 2020-2030 due to an inability to afford their prescriptions.
“Lowering drug prices…would allow people – especially those with chronic conditions and disabilities – to access the treatment they need.” (Nicole Rapfogel and Thomas Waldrop, Center for American Progress.)
Pharmaceutical innovation can be sustained without placing an unfair burden on Americans.
Lowering drug prices in the US will not reduce innovation in drug development because other levers can be pulled to sustain it, including policies that increase funding for the National Institutes of Health (NIH), improve the efficiency of clinical trials, and soften innovation-blocking patent laws.
American consumers are subsidizing pharmaceutical R&D for the rest of the world by paying over 3x what citizens in other OECD countries pay for branded prescription drugs. Trump’s executive order will shift the costs of innovation by effectively raising drug prices in other countries.
Other countries need to step up and “share the burden” of investment in breakthrough medicines by paying their fair share for prescription drugs. If other OECD countries lifted their price regulations and paid more for prescription drugs, the world would benefit from an uptick in new medicines introduced each year.
More opposed to Trump’s order:
The order will not meaningfully reduce drug prices in the US.
MFN pricing will do little to reduce drug prices in the US because drugmakers are more likely to increase their prices abroad or stop selling in foreign markets altogether to avoid the price comparison with the US, their most lucrative market. A 2022 economic analysis by UCLA and the Toulouse School of Economics concluded that if pharma companies were forced to charge Canadian drug prices, they would increase average Canadian drug prices by 216% while only dropping US prices by 7.5%.
Trump’s order does not address the real driver of high prescription drug costs that is the unique US ecosystem of insurers, pharmacy benefit managers (PBMs), and hospitals. Those middlemen collectively take “50% of every dollar” spent on prescription drugs and implement tactics that drive up prices in other ways. The total amount captured by these middlemen for a given drug can exceed that drug’s total price in Europe.
The order will diminish patient quality of care by limiting innovation and drug availability.
MFN pricing pegs drug prices to the willingness-to-pay of foreign governments, which undervalue medical innovation and its importance relative to the US. Lower prices would ultimately lead to lower pharma profits, less investment in groundbreaking medicines, and “shorter, less healthy lives for Americans.”
Government price setting policies lead to reduced investment in biopharmaceutical R&D. For instance, biopharma R&D investment in Europe went from being 24% higher than the US in 1986 prior to Europe’s adoption of price controls to now over 40% lower than the US.
Trump’s order effectively places price controls on pharmaceuticals in the US, a policy tactic that has historically created shortages when applied to other sectors such as housing and food.
The order is an overreach of executive authority.
Trump and federal agencies such as HHS do not have statutory authority to enforce price controls on private drug purchases. Any such power would have to be granted by congressional legislation.
The executive order does not contain any specific enforcement mechanisms to effect change. Pharma companies would likely want to see price increases in foreign markets before agreeing to any US price reductions and it is unlikely other countries will voluntarily increase their prices.
Be heard
We want to hear from you! Comment below with your perspective on Trump’s executive order and we may feature it in our socials or future editions. Below are topic ideas to consider.
Do you support mandating “most-favored-nation” drug pricing for Americans? Why or why not?
What are some arguments or supporting points you appreciate about a viewpoint you disagree with?
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So you have a really balanced pro/con when it comes to the isolated concept of reducing drug prices via executive order here, but the most controversial thing about this issue was that it simply replaced a very similar Biden executive order that was previously repealed. Without this context, the proposal seems quite reasonable. With the additional context, it seems like simply trying to take credit for a popular proposal. This was always the biggest criticism.
A way to approach this from a neutral stance might be to compare the repealed EO to the new one and note any significant differences. Maybe the Trump EO improved on shortcomings of the Biden EO that I wasn't aware of, or maybe it used some other mechanism to control prices. Then you could do the pro/con on weighing the two approaches. The way it's presented, it's like comparing the current EO to doing nothing, rather than the EO it is replacing.