President Trump enacted a comprehensive executive order (EO) that he asserts would reduce medicine prices in the U.S. by as much as 90%. Trump unveiled the program in the early hours of Monday at the White House.
The president is implementing the price reduction via a most favored nation (MFN) policy and directing the Department of Health and Human Services (HHS) to link government medication payments to the lowest prices paid by other developed nations.
“Some prescription drug and pharmaceutical prices will be reduced almost immediately by 50 to 80 to 90%,” Trump stated. “Big pharma will either abide by this principle voluntarily, or we will use the power of the federal government to ensure that we are paying the same price as other countries.”
Firms will have 180 days for discussions with the HHS before the body enforces a regulatory proposal to implement MFN pricing. The HHS will determine target pricing within the next 30 days.
In a communication to clients, analysts at Jefferies said that the executive order is ambiguous and lacks specificity about implementation.
According to White House officials on a conference call with reporters, the project aims to influence costs in Medicare, Medicaid, and commercial marketplaces. Given that executive orders do not supersede federal law, this innovative, contentious action is likely to encounter legal opposition from the pharmaceutical sector, as well as from suppliers, insurance companies, and pharmacy benefit managers.
In a short statement, HHS Secretary Robert F. Kennedy Jr. expressed his agreement with Senator Bernie Sanders, a long-standing critic of the pharmaceutical industry. He mentioned that his children, who identify as Democrats, were emotional and had tears in their eyes when he shared details of Trump’s executive order with them.
The U.S. incurs the greatest costs globally for prescription medications. Throughout his first administration, Trump’s several efforts to curtail federal expenditure on pharmaceuticals via an MFN provision faltered due to opposition from the biopharmaceutical sector and House Republicans. A last-minute initiative, endorsed by
Trump during the last weeks of his first administration, was nullified by a Maryland court in January 2021.
The biopharmaceutical sector has consistently argued that initiatives aimed at lowering drug prices, such as those mandated by the Inflation Reduction Act, would adversely affect the capacity of pharmaceutical companies to innovate and create new medications.
The Trump initiative also comes with the industry’s preparation for tariffs proposed by the government. Drugs were omitted from Trump’s “Liberation Day” announcement about baseline and reciprocal trade charges last month, but authorities have since threatened to implement industry-specific taxes.
