Will President Trump’s Executive Order Lower Drug Prices? 

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In a new executive order, President Trump has outlined a series of actions to lower prescription drug prices in the U.S. by basing them on lower prices in other countries. The overall approach aims to address global pricing disparities where the U.S. typically pays higher prices for prescription drugs than comparable countries, and it featured in rulemaking at the end of President Trump’s first term – a rule that was blocked by several U.S. district courts on procedural grounds and then rescinded by the Biden administration.

The new executive order calls on the federal government to take unspecified administrative actions to address “global freeloading,” enable direct-to-consumer sales of prescription drugs at lower “most favored nation” prices, and establish “most favored nation price targets” for drug companies, to be delivered either through voluntary compliance or federal rulemaking. But the executive order leaves many questions unanswered. Perhaps first among them is under what authority can President Trump implement these actions administratively? And: What are the so-called “comparably developed” countries that will be used as the basis for setting price targets? How will these price targets be calculated? Will price targets be developed for all prescription drugs available for sale in the U.S. or a subset? How will these price targets be implemented within existing pricing systems in the U.S., such as in Medicaid and Medicare?

In terms of the politics, the public strongly supports a range of proposals to lower prescription drug costs, and tying U.S. drug prices to lower prices in other countries has intuitive appeal on fairness grounds. But the actions proposed in this executive order may generate some pushback from within President Trump’s own party based on long-standing GOP concerns about government intervention in drug pricing. Republican policymakers have criticized the federal government’s role in Medicare’s new drug price negotiation program as akin to price setting, even though it involves a months-long negotiation process over the price that Medicare will pay. In President Trump’s new executive order, the federal government is directed to establish price targets for prescription drugs in the U.S. based on lower prices that manufacturers charge in other countries, which bears a strong resemblance to price setting.

If all the provisions in this executive order came to fruition, it could bring about substantially lower drug prices in the U.S. Given the amount of revenue at stake for pharmaceutical companies, however, it’s reasonable to expect the industry to respond in a way that protects their financial interests, including raising prices in other countries – an outcome that could leave U.S. patients no better off depending on the magnitude of the increase. Ultimately, assessing the impact of President Trump’s newest iteration of “Most Favored Nation” drug pricing depends on details that have yet to be fleshed out, but answers to some questions may come within 30 days, the time period allotted to the HHS Secretary to establish the administration’s most-favored-nation price targets.