President Donald Trump announced plans to sign an executive order reviving a policy from his first term to reduce prescription drug prices by tying U.S. costs to those paid in other developed countries. The order reintroduces the โMost Favored Nationโ pricing model, which links what Medicare pays for certain drugs to the lowest price charged globally.
The administration said this change will apply primarily to medications covered under Medicare Part B, including drugs administered in doctorsโ offices, such as cancer treatments and injectables.
According to Trump, the order will lower drug prices โalmost immediately,โ cutting costs by an estimated 30% to 80%. However, the White House has not released a finalized list of which drugs will be affected. A similar policy introduced in 2020 faced legal challenges and never took effect. In 2021, then-President Joe Biden rescinded that earlier rule.
How does the policy change Medicare pricing?
The executive order instructs the Department of Health and Human Services (HHS) to adjust Medicare payments based on international reference pricing. Under the plan, the U.S. would match the lowest price for a drug in any high-income country.
Will the order affect drug prices outside Medicare?
The policy builds on a previous order Trump signed in April, which standardized Medicare Part B payments across all treatment locations. That order also targeted insulin and epinephrine prices, with caps as low as 3 cents for low-income patients and $15 for allergy medication, plus minimal administrative fees.
The directive also aims to expand drug importation programs to help states obtain lower-cost pharmaceuticals abroad, a strategy the administration said could save millions. Trumpโs order instructs HHS to support state-level efforts to negotiate better deals on medications used in Medicaid programs, according to April’s fact sheet.
In addition, the order proposes broader reforms that could extend beyond current Medicare negotiations under the Inflation Reduction Act. Pharmaceutical industry groups expect the policy to target more drugs than those previously subject to price caps, though the full scope remains unclear.
What are the possible risks or challenges?
A 2024ย Congressional Budget Office report said that government-imposed price matching may reduce industry incentives to invest in research and development. Others warned that the plan could exacerbate drug shortages, especially for generics, if foreign manufacturers redirect supply to countries that pay higher prices.
How are prices trending and why is this policy resurfacing now?
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Prescription drug prices rose over 15% from January 2022 to January 2023, per the Department of Health and Human Services, with nearly half exceeding inflation.
Between January 2022 and January 2023, more than 4,200 prescription drug prices increased by more than 15%, according to HHS data, with nearly half of those price hikes exceeding the inflation rate. The average cost per drug reached $590.
Trump has argued that Americans unfairly bear the burden of global pharmaceutical development costs, noting that identical drugs often cost far less overseas despite being manufactured by the same companies. By enforcing a โMost Favored Nationโ clause, the administration claims the U.S. will stop overpaying and restore price fairness.
What comes next?
The executive order directs HHS to seek public comment on the policy and to assess how it will interact with existing drug price negotiations under the Inflation Reduction Act. While the administration projects significant savings for taxpayers and patients, legal and regulatory hurdles remain. Federal courts blocked the first version of this policy in 2020, and similar opposition is expected again.
Despite these challenges, the White House has positioned the order as a central piece of its health care agenda, touting it as one of the most impactful executive actions on drug prices in U.S. history.
