Get ready to rumble. In one corner, it’s President Donald Trump. In the other, it’s the pharmaceutical industry.
Monday, Trump signed a sweeping executive order that he says will cut the price of drugs in the U.S. up to 90%. Trump announced the initiative on Monday morning at the White House.
The president is installing the price reduction through a most favored nation (MFN) policy and is instructing the Department of Health and Human Services (HHS) to tie what government pays for drugs to the lowest prices paid by other economically advanced countries.
“Some prescription drug and pharmaceutical prices will be reduced almost immediately by 50 to 80 to 90%,” Trump said. “Big pharma will either abide by this principle voluntarily or we will use the power of the federal government to ensure that we are paying the same price as other countries.”
According to the order, companies will have 180 days to negotiate with the HHS before the agency will impose a rulemaking plan to impose MFN pricing. The HHS will establish target prices over the next 30 days.
In a note to clients, analysts with Jefferies said the EO is “vague with little detail on implementation.”
The initiative is designed to impact prices across Medicare, Medicaid and commercial markets, White House officials said on a call with reporters. Since executive orders don’t override federal law, the transformative, controversial measure is certain to face legal challenges from the pharmaceutical industry as well as providers, insurers and pharmacy benefit managers (PBMs).
Trump's most pointed words on Monday were directed at PBMs.
“We’re going to totally cut out the famous middlemen,” he said. “Nobody knows who they are, middlemen, I’ve been hearing the term for 25 years, middlemen. Nobody knows who they are but they’re rich.”
In brief remarks, HHS Secretary Robert F. Kennedy Jr. aligned himself with long-time pharma adversary Sen. Bernie Sanders, saying his children, “who are Democrats,” had “tears in their eyes” when he told them about Trump’s EO.
“Congress is controlled in so many ways by the pharmaceutical industry,” RFK Jr. added. “This was an issue that people talked about but nobody wanted to do anything because it was radioactive.”
The U.S. pays the highest prices in the world for prescription drugs. During his first term, multiple attempts by Trump to reduce government spending on drugs through an MFN clause crumpled under pressure from the biopharma industry and House Republicans. A last-gasp effort, signed by Trump in the final weeks of his first term, was quashed by a Maryland judge in January of 2021.
Recently, the administration has been unsuccessful in its attempts to convince Republicans to include an MFN clause in their domestic policy package, according to Politico, leading the president to attempt to advance the initiative on his own.
The biopharma industry has long argued that efforts to reduce the price of drugs—such as those imposed by the Inflation Reduction Act—will negatively impact the ability of drugmakers to discover and develop new drugs.
“Importing foreign prices from socialist countries would be a bad deal for American patients and workers," Pharmaceutical Research and Manufacturers of America (PhRMA) CEO Stephen J. Ubl said in a prepared statement following Trump's announcement. "It would mean less treatments and cures and would jeopardize the hundreds of billions our member companies are planning to invest in America—threatening jobs, hurting our economy and making us more reliant on China for innovative medicines."
Instituted by the Joseph Biden administration, the Inflation Reduction Act (IRA) will slice the price of 10 select drugs between 38% and 79% starting in 2026.
The Trump effort also comes as the industry braces for tariffs threatened by the administration. Drugs were excluded from Trump’s “Liberation Day” reveal of baseline and reciprocal trade duties last month, but officials have threatened to impose industry-specific tariffs since then.
The industry is also sorting out the impacts of staff and funding cuts to the Department of Health and Human Services and the National Institutes of Health.