Trump signs drug price executive order. What does it say?
President Donald Trump signed an executive order on May 12 directing drugmakers to lower the prices of their medicines so they line up with what other countries pay.
Trump's order puts the U.S. trade representative and the Department of Commerce on a 30-day deadline to give drugmakers the price targets, with the government taking further action to lower prices if those companies do not make "significant progress" towards those goals within six months of the order being signed.
During his first term, Trump in 2020 had pushed a similar "most favored nation" rule for drug prices that would have applied to Medicare payments but was later rescinded by the Biden administration. The new executive order builds on that policy by not limiting it to certain drugs under Medicare but also including Medicaid and private sector insurance available on the commercial marker, said White House spokesman Kush Desai.
How much drug prices change from Trump's executive order remains unclear, though the president said in a social media post May 12 that they'd be cut by "59%, PLUS!" Later at the White House, Trump put the figure at between 59% and 80% before adding, "I guess even 90%."
Critics of the "most favored nation" concept argue that drug companies could game the system by securing deals with foreign governments for rebates to maintain current drug pricing in the United States. Others say it could stifle innovation in medicine if the pharmaceutical industry loses profits.
What does the Trump drug price executive order say?
The Secretary of Health and Human Services Robert F. Kennedy Jr. will set targets for price reductions across all markets in the United States within 30 days, a White House official said on May 12.
If adequate progress is not made toward the price reduction targets, the HHS secretary will impose most favored nation pricing via a rulemaking, according to the official.
How do US drug prices compare with other countries?
Drug prices in the United States are nearly three times those of 33 comparison countries, according to a 2024 report from the Health and Human Services Department. About 67 million Americans are enrolled in Medicare.
Tying Medicare drug prices to international prices is a sharply different approach than how the Biden administration attempted to lower Medicare drug prices.
Under Biden's 2022 climate and health legislation, the Inflation Reduction Act, Medicare was empowered to negotiate prices with pharmaceutical companies on a limited number of medications.
Calling the process he was establishing “equalization,” Trump said other countries would have to pay for research and development.
"Starting today, the United States will no longer subsidize the health care of foreign countries, which is what we were doing," said Trump during the White House event.
The Biden administration already negotiated lower prices on 10 widely prescribed drugs such as Xarelto or Eliquis, which will take effect in 2026. In January, Medicare named an additional batch of 15 drugs subject to negotiation this year. Those included blockbuster diabetes and weight loss drugs Ozempic and Wegovy, a cost-saving move that would take effect in 2027.
Asked how Trump's plan affects Biden's Inflation Reduction Act and drug price negotiations, the White House official said that after the first round of drug price negotiations, prices still ended up "in many cases, over 200% higher than what many foreign countries get."
The official added that they viewed that figure as inadequate and that the Trump administration is taking action to go beyond what was achieved under the Inflation Reduction Act.
Democrats react to Trump's order
Senate Finance Committee ranking member Ron Wyden, D-Oregon, called Trump's order "all hat and no cattle."
“Trump spent his entire first term blathering about Big Pharma, but in the end he always backed down instead of fighting for American seniors and families," Wyden said in a statement.
Wyden said it was the Democrats who took on Big Pharma by giving Medicare the power to negotiate lower drug prices on behalf of seniors and capping their out-of-pocket costs for expensive prescriptions.
"If Trump was serious about lowering drug prices, he would work with Congress to strengthen Medicare drug price negotiations, not just sign a piece of paper," he said.
Trump knows “his executive order will be thrown out by the courts," added Sen. Bernie Sanders, the Vermont independent and former two-time Democratic presidential candidate who has long pushed for lower prescription drug prices.
Kennedy mentioned Sanders' position during the May 12 news conference at the White House, prompting the senator to reply that the best way to turn the idea into practice is for Trump to support legislation on the issue.
Impact on drug rebates, insurance discounts unclear
Drug pricing experts said Trump's order does little to explain how it will affect the nation’s complex web of pharmaceutical rebates and insurance discounts that limit how much consumers pay out of pocket. Those rebates and discounts are used to fund certain Medicaid programs and to lower health insurance premiums, said Antonio Ciaccia, CEO of 46brooklyn and a drug pricing expert.
If those pharmaceutical discounts and rebates disappear, Ciaccia said it could jeopardize funding for other health priorities. He added that Trump's executive order does not explain how that funding gap might be addressed.
“I don't see a lot of the how," Ciaccia said. "And the how is always the rub when it comes to fixing drug pricing problems in the U.S."
Contributing: Joey Garrison, Paste BN; Reuters