On May 12, 2025, President Trump signed the second drug pricing-related Executive Order (EO) of his current administration. While President Trump’s first drug pricing-related EO focused on lowering the cost of prescription drugs by continuing and modifying the negotiations initiated by the Inflation Reduction Act of 2022 and issuing directives for administrative agencies to initiate cost cuts, this EO focuses on global comparative pricing.
The EO states that while American citizens represent only 5% of the global population, they fund around 75% of global pharmaceutical profits, thus causing Americans to underwrite the lion’s share of drug research and development for the global population. The EO claims that this discrepancy is rooted in a global price discrimination “scheme” whereby Americans pay upward of three times the cost for pharmaceuticals when compared to other similarly situated nations. This practice is alleged to have arisen as the result of pharmaceutical companies fighting against the ability of both public and private payors to negotiate for better drug prices for American patients. The EO concludes that the current scheme offers foreign health systems a “free ride” at the cost of American’s “generosity.” In an effort to rebut this practice, the EO directs that Americans, as the largest consumer of pharmaceutical products, receive “most-favored nation” pricing for pharmaceuticals. Said differently, under the EO, Americans would receive the pharmaceutical pricing equivalent to the similarly situated country receiving the best pricing.
To address this discrepancy, the EO makes several directives including the following:
- The Department of Health & Human Services (HHS) shall facilitate direct-to-consumer (rather than insurance-based) purchasing programs for pharmaceutical companies to sell their product at most-favored nation pricing.
- United States Trade Representatives and the Secretary of Commerce shall ensure that foreign countries are not engaged in any unreasonably discriminatory drug-pricing practices or policies.
- Within 30 days of the EO, the Secretary of HHS, Robert F. Kennedy, Jr., in combination with the Centers for Medicare & Medicaid Services shall establish “target prices” for pharmaceutical products in line with most-favored nation pricing.
- Should pharmaceutical companies fail to make “significant progress” voluntarily bringing their prices to the most-favored nation target price, the Administration shall engage in rulemaking to enforce most-favored nation prices.
These rulemaking processes aimed at encouraging pharmaceutical companies to comply with offering the most favored nation pricing for their products to American consumers includes:
- HHS certification that importation of prescription drugs from other countries pursuant to 804(j) of the Federal Food, Drug, and Cosmetic Act (FDCA) poses no additional risk to the health and safety of consumers as well as a clear pathway for importation of low-cost prescription drug alternatives from other similarly situated countries.
- Secretary of Commerce pursuing enforcement of anticompetitive practices perpetuated by pharmaceutical companies.
- Secretary of Commerce action regulating the export of drugs or precursor material for drug production.
- Commissioner of Food and Drugs revoking approval for drugs that have been improperly marketed or deemed ineffective or unsafe.
- Action by all agency heads to address “global freeloading and price discrimination against American patient.”
This is not the first time the Trump administration has addressed drug pricing relative to other similarly situated countries. In late 2020, the first Trump Administration proposed an Executive Order requiring Medicare Part B drug prices to align with most-favored nation pricing. This EO faced significant challenges in court and was ultimately dropped by the Biden Administration.
Though this current EO has received significant press, several questions remain unanswered including how target prices will be identified and the allowable timeframe for pharmaceutical companies to voluntarily make “significant progress.” PhRMA, a pharmaceutical industry lobby group, responded to the EO almost immediately, calling it a “bad deal for American patients.”