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Exploring the Implications of Trump's Drug Pricing Executive Order

On May 12, 2025, President Trump issued a new Executive Order, seeking to impose a new price control policy on U.S. and foreign drug manufacturers. It would do so through a policy of “most-favored-nation” pricing, in which Administration officials are to communicate price targets to pharmaceutical manufacturers.

The Executive Order directs:

• Both the Secretary of Commerce and the United States Trade representative to “take all necessary and appropriate action to ensure foreign countries are not engaged in any act, policy, or practice that may be unreasonable or discriminatory or that may impair United States national security and that has the effect of forcing American patients to pay for a disproportionate amount of global pharmaceutical research and development, including by suppressing the price of pharmaceutical products below fair market value in foreign countries.”
• The Secretary of Health and Human Services (HHS) to “facilitate direct-to-consumer purchasing programs for pharmaceutical manufacturers that sell their products to American patients at the most-favored-nation price.” According to the Executive Order, if “significant progress towards most-favored-nation pricing for American patients is not delivered,” HHS is instructed to propose a rulemaking plan to impose most-favored-nation pricing. It further instructs the HHS to “consider certification to the Congress that importation under section 804(j) of the Federal Food, Drug, and Cosmetic Act (FDCA) will pose no additional risk to the public’s health and safety and result in a significant reduction in the cost of prescription drugs to the American consumer; and if the Secretary so certifies, then the Commissioner of Food and Drugs shall take action under section 804(j)(2)(B) of the FDCA to describe circumstances under which waivers will be consistently granted to import prescription drugs on a case-by-case basis from developed nations with low-cost prescription drugs.”
• The Secretary of Commerce and other agencies to review and consider all necessary action regarding the export of pharmaceuticals or precursor material that “may be fueling the global price discrimination.”
• The Commissioner of Food and Drugs to review and potentially modify or revoke approvals granted for drugs that may be unsafe, ineffective, or improperly marketed.

The Executive Order also references the President’s earlier Executive Order 14273, which among other things directs HHS to “conduct joint public listening sessions with the appropriate personnel from the Department of Justice, the Department of Commerce, and the Federal Trade Commission and issue a report with recommendations to reduce anti-competitive behavior from pharmaceutical manufacturers.” Upon issuance of that report, which is due by October 12, 2025, the Attorney General and the Chairman of the Federal Trade Commission are directed to undertake enforcement action against anti-competitive practices under federal antitrust laws.

Analysis

The Administration faces several hurdles in being able to meaningfully impact drug prices through executive action alone. There is no law that allows the United States government to dictate drug pricing to manufacturers during peacetime. It remains to be seen whether Congress would pass legislation allowing HHS to negotiate pricing with manufacturers on behalf of the millions of group and individual health plans throughout the United States. If Congress were to act, it would more likely concentrate its efforts on allowing price negotiation through the two largest federal health insurance programs—Medicare and Medicaid. For decades, efforts aimed at allowing the federal government program to use its buying power to negotiate with manufacturers on a broad range of prescription drugs have hit a wall of political opposition. Even the Biden Administration’s Inflation Reduction Act of 2022, which enables the federal government to negotiate prices for a subset of drugs through the Medicare program, does not apply to drug prices more widely.

Such an attempt would likely be met with swift legal action on the part of drug manufacturers. During the first Trump administration, the Centers for Medicare and Medicaid Services (CMS) published an Interim final rule seeking to establish a mandatory nationwide Most Favored Nation model in which the Medicare Part B program would have established pricing only for physician-administered prescription drugs (drugs infused or injected at the doctor’s office) based in part on international prices. Within weeks of the issuance of that interim rule, federal courts in three states issued preliminary injunctions in cases brought by manufacturers, temporarily enjoining HHS from implementing the rule. CMS later withdrew the plan.

Other instructions in the Executive Order could potentially yield more widespread benefits. Continued expansion of drug importation could have a positive effect on cost reduction more widely. Moreover, expansion of biosimilars, expansion in 340(b) hospital programs and other reforms long championed by Rx reformers could lead to a broader impact on prescription drug pricing.

Meanwhile, President Trump has highlighted prescription drug pricing. We will keep you informed about its impact on your employee benefit plans.

For more information, you can read:

• The May 12, 2025 Executive Order: Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients – The White House
• The April 15, 2025 Executive Order--Federal Register :: Lowering Drug Prices by Once Again Putting Americans First