“Most Favored Nation” policy aims to cut prices by up to 80%, but faces legal and political hurdles
President Donald Trump on Monday signed a sweeping executive order aimed at slashing prescription drug prices in the United States by tying them to the lowest prices paid by other developed countries—a controversial move that revives and expands his “most favored nation” (MFN) pricing proposal from his first term.
The order—framed as a response to what Trump called decades of “global freeloading”—seeks to realign the pharmaceutical pricing system by leveraging America’s status as the world’s largest drug purchaser. In a press conference flanked by Health and Human Services Secretary Robert F. Kennedy Jr. and CMS Administrator Mehmet Oz, Trump said the US will no longer subsidise lower drug costs in foreign countries at the expense of its own citizens.
“We’re no longer paying ten times more than another country,” Trump said. “Americans will finally be treated fairly. We will pay the lowest price in the world.”
Key provisions of the executive order
The order contains several major directives:
- Price pegging: Pharmaceutical manufacturers will be required to offer U.S. consumers prices no higher than the lowest price available in other developed nations.
- Direct-to-consumer sales: HHS is instructed to create a legal pathway for Americans to purchase drugs directly from manufacturers at MFN prices, bypassing intermediaries.
- Foreign policy levers: The Commerce Department and U.S. Trade Representative will pursue “unreasonable and discriminatory” pricing policies abroad that force U.S. consumers to shoulder global R&D costs.
- Anti-competitive enforcement: The Department of Justice and FTC are directed to investigate and penalise anti-competitive practices in the drug industry.
- Potential import expansion: The FDA is instructed to consider expanding safe drug imports from low-cost developed countries.
- Fallback rulemaking: If manufacturers do not voluntarily offer MFN pricing within 30 days, the administration will move to enforce it via regulation.
Political and industry reaction
The order sparked immediate debate, drawing praise from some patient advocates and pushback from the pharmaceutical industry.
AARP applauded the move, calling it long overdue. “For too long, big drug companies have been ripping off America’s seniors,” said advocacy chief Nancy LeaMond.
But the Pharmaceutical Research and Manufacturers of America (PhRMA), the industry’s main lobby group, warned the policy could reduce access to new treatments and stifle innovation.
“Importing foreign prices from socialist countries would be a bad deal for American patients and workers,” said PhRMA CEO Stephen Ubl. “It jeopardises hundreds of billions in planned investment.”
Industry analysts noted that the order’s lack of detail and reliance on future negotiations could limit its immediate impact. Jefferies and JPMorgan both flagged legal and logistical hurdles, particularly over Trump’s ability to impose pricing rules without Congressional approval.
Legal precedent and future challenges
Trump previously attempted to implement a narrower version of the MFN plan during his first term, tying Medicare Part B prices to international benchmarks. That effort was blocked in federal court for failing to follow proper rulemaking procedures.
The current order expands the scope to include Medicare, Medicaid, and potentially the broader commercial market. Administration officials argue that executive authority under trade and public health laws gives them sufficient latitude to act—though court challenges are likely.
Some experts warn that rather than forcing global price convergence, drugmakers may simply withdraw products from low-margin overseas markets to preserve their U.S. profits, undermining the policy’s intent.
Global dynamics and broader implications
Trump’s order also puts pressure on foreign governments, especially in Europe, to raise prices for medications, effectively shifting some of the global R&D burden off American consumers.
“Europe’s going to have to pay a little bit more,” Trump said. “America is going to pay a lot less.”
The order positions drug pricing as not just a domestic health issue but a matter of trade fairness and national competitiveness. The administration said it would consider tariffs or export restrictions on drug precursors if foreign countries do not adjust.
Market impact
Despite the aggressive rhetoric, U.S. pharmaceutical stocks closed higher Monday, buoyed by optimism from the US-China trade truce and scepticism about the policy’s enforceability. Merck rose over 4%, with Pfizer and Amgen up more than 2%.
European drugmakers fell initially but mostly recovered, with AstraZeneca and GSK both ending the day higher. Analysts attributed the muted reaction to uncertainty over whether the order will withstand legal and political scrutiny.
What’s next
Within 30 days, HHS must establish target prices and open negotiations with drugmakers. If sufficient progress is not made, rulemaking will begin. Simultaneously, the administration will pursue trade pressure and enforcement actions abroad.
The move also adds a new dimension to Trump’s broader effort to reshore drug manufacturing, including potential tariffs on imported medicines and streamlined regulations for domestic production facilities.
