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President Donald Trump has enacted an executive order aimed at reducing drug prices for Americans, a step that could disrupt the pharmaceutical sector in its largest and most lucrative market.
The order does not fully implement a “most favored nation” policy, which would compel drug manufacturers to provide the lowest prices available worldwide to the US. Trump has previously criticized other nations for taking advantage of US consumers, asserting that American patients are subsidizing medications that are less expensive in other countries.
However, a US official stated on Tuesday that the administration was “keenly focused on reducing the gap between what the United States pays for drugs compared to other developed nations”.
Research by RAND healthcare for the Department of Health and Human Services revealed that the US spent approximately 3.2 times more for branded medications than other developed countries in 2022—the latest available data.
The official noted that the executive action aims to “encourage a more competitive prescription drug market”.
Trump’s order will instruct the US Food and Drug Administration (FDA) to permit more states to directly import medications from countries offering lower prices, following Florida’s authorization to import from Canada in January 2024.
Additionally, it includes modifications to the drug-pricing measures established in former President Joe Biden’s Inflation Reduction Act, which, for the first time, authorized Medicare, the government insurance program for seniors, to negotiate drug costs.
Significantly, in a favorable outcome for the pharmaceutical industry, the order advocates for the elimination of the differing price negotiation timelines for pills and injectables. Under the Inflation Reduction Act, Medicare could negotiate the price of popular medications after nine years, but would have to wait 13 years for injectables, which attracted criticism from pharmaceutical firms.
Nonetheless, the order does not specify how many years manufacturers would have to wait for each category nor does it clarify how they intend to prevent increased costs for Medicare.
During his first term, Trump introduced several initiatives to attempt to lower drug prices, including directing the Secretary of Health and Human Services to trial a payment model based on a most favored nation policy, although this was never put into action.
The president’s order instructs the FDA to tackle a backlog of approvals for generic and biosimilar drugs by “streamlining” the approval process. It also reduces the costs of insulin and EpiPens for uninsured individuals and those with lower incomes.
On Monday, the Trump administration initiated a national security investigation that could result in tariffs on drugs—potentially escalating his trade conflict—but a US official maintained that drug prices could still be decreased.
“We can pursue dual objectives—ensuring that government payments and [intellectual property] are optimized to reflect the value of a drug while also maintaining a secure supply chain in the event of geopolitical tensions or natural disasters,” the official stated.
