President Donald Trump signed an executive order May 12 directing drugmakers to sell medicines in the U.S. at prices similar to those offered in other wealthy countries, or face penalties and enforcement actions.
The move tasks HHS Secretary Robert F. Kennedy Jr. with setting target prices to bring U.S. drug costs “in line with comparably developed nations,” known as a “most favored nation” model. If drugmakers do not make progress toward those targets, the order directs federal agencies to explore ways to implement most favored nation pricing.
Here are seven notes:
- Under the order, HHS has 30 days to develop and communicate goals on price reductions with drugmakers. If significant progress on reducing prices is not made, HHS is instructed to propose a rulemaking plan to impose most favored nation pricing.
The order does not specify a clear legal mechanism on how lower drug prices would be mandated. It is also unclear how the order might affect Medicare drug pricing negotiation efforts under the Inflation Reduction Act. CMS shared the first round of negotiated prices for 10 drugs in 2024, which are set to take effect in 2026 and are expected to save Medicare more than $6 billion.
- If drugmakers fail to significantly lower prices after initial negotiations, the order authorizes the commerce secretary and U.S. trade representative to pursue trade actions against countries that keep drug prices artificially low, according to the executive order. It also directs federal agencies to consider restricting exports of certain drugs or materials as part of broader efforts to address pricing disparities between the U.S. and other countries.
- The order also instructs the FDA to explore pathways to import lower-cost drugs from countries including Canada if domestic pricing negotiations stall. It also calls on the Justice Department and FTC to pursue antitrust enforcement against drugmakers or supply chain middlemen that engage in anticompetitive practices.
- During President Trump’s first term, he attempted to implement a most favored nation model that would have capped the cost of certain Medicare drugs to the prices paid in certain wealthy countries. The effort was blocked in a federal court, which determined the administration had bypassed rulemaking procedures. The executive order revives the concept of the most favored nation pricing model but goes further by including drugs covered by Medicaid and private insurance plans.
- While the administration has not named which drugs will face price cuts, officials indicated that GLP-1 medications including Ozempic, Wegovy and Zepbound are likely to be targeted, according to NBC News. The White House recently rejected a Biden-era proposal to allow Medicare coverage for weight loss drugs, a move that would have reduced patient costs but added an estimated $25 billion to federal spending over a decade.
- President Trump said at the White House on May 12 that the executive order would lead to cuts in prescription drug prices between 50% and 90%.
- Pharmacy and biotech groups have described the “most favored nation” pricing model as a “flawed” model that would hamper medical innovation in the U.S.
In a statement issued May 12, the Biotechnology Innovation Organization said the U.S. should not look to other countries for how much it pays for drugs.
However, the Pharmaceutical Research and Manufacturers of America, the main industry lobbying group, praised certain aspects of the order that threaten the use of trade negotiations to push foreign governments to pay more for medications.
“U.S. patients should not foot the bill for global innovation,” Stephen Ubl, PhrMA’s chief executive, told The New York Times.
