US President Donald Trump has signed an executive order aimed at reducing prescription drug prices by linking them to what pharmaceutical companies charge in other developed nations.
The policy, based on a 鈥渕ost favoured nation鈥� pricing model, would require drugmakers to match the lowest prices they offer in comparable countries or face regulatory action.
The order gives drug manufacturers 30 days to meet government-set price targets. If they fail to make 鈥渟ignificant progress鈥� within that timeframe, the administration will move forward with additional measures. These include federal rulemaking, expanded drug importation, and support for direct-to-consumer distribution models that bypass insurers and pharmacy benefit managers (PBMs).
Prescription drug prices in the US are significantly higher than in other developed countries. Pharma companies launched new US drugs at prices 35% higher鈥痠n 2023 compared to those launched in 2022, according to a Reuters鈥痑rticle.鈥疶he administration argues that US consumers have long been subsidising lower drug prices abroad, particularly in Europe.
Speaking at a 12 May White House press briefing, Trump said: 鈥淭he drug lobby is the strongest lobby. But starting today, the US will no longer subsidise the healthcare of foreign countries, which is what we were doing.鈥�
He cited a personal anecdote involving a businessman friend who reported paying $88 for a weight-loss injection in London, UK, compared to $1,300 for the same drug in New York.
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By GlobalData鈥淚t’s the same box, made in the same plant, by the same company,鈥� Trump said. 鈥淲e no longer tolerate profiteering and price-gauging from big pharma.鈥澛�
The executive order instructs the Secretary of Health and Human Services (HHS) to coordinate with other agencies to communicate specific pricing targets to manufacturers. It also calls for exploring legal avenues to block what it calls 鈥渦nreasonable or discriminatory鈥� pricing practices and to prevent foreign governments from driving global prices down at US consumers鈥� expense.
Despite the order, several big pharma companies saw their stock prices rise on Monday (12 May), including Regeneron, which saw a 9% rise; MSD, which reported a 6% increase; and AbbVie, which saw a 4% uptick.聽
These proposals build on previous administration efforts. Trump鈥檚 previous attempt to introduce the policy in 2020 aimed to limit Medicare Part B reimbursement rates to prices paid in a select group of developed countries. That rule was ultimately invalidated by a federal judge and rescinded under President Joe Biden.鈥�
The 色界吧 Research and Manufacturers of America (PhRMA), the sector鈥檚 leading trade group, warned that the move would have serious consequences for innovation and access.
鈥淚mporting foreign prices from socialist countries would be a bad deal for American patients and workers,鈥� said PhRMA CEO Stephen Ubl.
鈥淚t would mean fewer treatments and cures and would jeopardise the hundreds of billions our member companies are planning to invest in America 鈥� threatening jobs, hurting our economy and making us more reliant on China for innovative medicines.鈥�
While PhRMA acknowledged the problem of high US drug prices, it argued that foreign countries underpay for innovation and that domestic price inflation is largely driven by middlemen.
鈥淭he US is the only country in the world that lets PBMs, insurers, and hospitals take 50% of every dollar spent on medicines,鈥� Ubl said. 鈥淭he amount going to middlemen often exceeds the price in Europe.鈥�
The pharmaceutical sector has historically resisted the鈥�鈥渕ost favoured nation鈥� approach, warning it could reduce global R&D investment and lead to supply disruptions. However, Trump framed the policy as a corrective to long-standing inequities in global drug pricing, saying: 鈥淔or the first time in many years, we’ll slash the cost of prescription drugs, and we will bring fairness to America.鈥�
