Latest Trump Executive Order Redirects Drug Pricing Debate

On Sunday, May 11, President Donald Trump announced on Truth Social that he would sign an Executive Order today aimed at lowering prescription drug prices. The order refocuses the drug pricing debate, which often is centered around patents, on “equalizing” pricing among developed nations.

In his social media post, Trump blamed pharmaceutical companies for chalking up the high price of drugs in the United States to cover research and development costs. “It was always difficult to explain and very embarrassing because, in fact, there was no correct or rightful answer,” Trump wrote. He also implied that Democrats have resisted efforts to lower prices due to campaign contributions from the industry and said the Order signed today will reduce drug prices “almost immediately, by 30% to 80%” via a “most favored nations” policy that will mandate U.S. citizens pay the same price as the nation paying the lowest price.

As a result, prices in other developed countries will rise “to equalize,” said Trump. He added: “Our Country will finally be treated fairly, and our citizens Healthcare Costs will be reduced by numbers never even thought of before. Additionally, on top of everything else, the United States will save TRILLIONS OF DOLLARS.”

The most favored nations theory has been floated before. Trump tried to enact a similar order during his first term, but it was blocked by the courts and rescinded by President Joe Biden. The issue has also been raised in congressional hearings as one of the many factors contributing to high U.S. drug prices.

In a 2019 article, while stopping short of advocating for price controls like the ones proposed today, IPWatchdog Founder and CEO Gene Quinn outlined the problem Trump’s order is attempting to fix. “The reason drugs are cheaper in other countries is because those other countries have price controls,” Quinn wrote…. “This means the American consumer is left to pay for the innovation costs (i.e., the research, development and regulatory process to ensure the drug is safe) because there are no price controls in the United States. So, U.S. citizens are now and have been subsidizing cheap drugs for the world.”

And in an earlier article, Quinn explained that “this is not a patent problem, but rather it is a government problem. Rather than seize control of the U.S. health care industry, government should have tackled the underlying drivers of the cost, and a great place to start would have been in the staggeringly disparate cost of drugs between the U.S. and virtually every other country around the world.”

In a press conference held today, Trump backed off somewhat on blaming the pharmaceutical industry for the pricing problems and instead targeted countries and regional governments like the European Union for the discrepancy. Referring to his solution as “equalization,” Trump said, “starting today the United States will no longer subsidize the healthcare of foreign countries…. We will no longer tolerate price gouging from big pharma—but it was really the countries that forced big pharma to do things they weren’t comfortable with.”

Trump said Americans pay 70% more for prescription drugs than we did in the year 2000 and pay the highest prices for drugs anywhere in the world by a factor of 5 to 10 times more. A Fact Sheet on the order said that the United States has less than 5% of the world’s population but funds roughly 75% of global pharmaceutical profits.

During the press conference Trump gave examples of drug pricing discrepancies, including one breast cancer drug that costs Americans $16,000 per bottle while the same drug is 1/6 of that price in Australia and 1/10 that price in Sweden; and asthma drug that is $500 in the United States and $40 in the UK; and he said that Ozempic costs ten times more in the United States than the rest of the developed world.

Another key aspect of the order would cut out “middlemen” and mandate direct-to-consumer sales of drugs at the most favored nations price. The order would also essentially impose price controls on pharmaceutical companies that do not comply with most favored nations pricing.

To deter “foreign nations freeloading on American-financed innovation,” the order directs the U.S. Trade Representative and the Secretary of Commerce 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.”

John F. Crowley, President and CEO of the Biotechnology Innovation Organization (BIO) said in a statement that today’s order is “deeply flawed” and “would devastate our nation’s small- and mid-size biotech companies – the very companies that are the leading drivers of medical innovation in the United States and the cornerstone of America’s biotechnology leadership.” Crowley added:

“Importing socialized medicine will not make American’s healthier or our economy stronger. It will only serve to empower China and our other adversaries and undermine our economic and national security. Applying other countries’ antiquated approach to how they value – and pay – for medicines will stall investment across America’s biotech companies, risk access to vital treatments and cures for millions of American patients, and lead to fewer American jobs.

“Patients and families are not a bargaining chip in a trade war, but that’s exactly how they are being treated – first through proposed tariffs on our nation’s medicines, now with foreign reference pricing in the name of fairness.

“Researchers that spend years developing cures and breakthrough treatments are being penalized and the US is falling behind in the 21st century biotech race. Meanwhile, US medication prices prop up middlemen that prevent cost savings from being passed on to patients. The solution is investments that ensure the U.S. continues to lead the world in medical innovation, and policies that simplify the system.”

And in statements made to the press today, Stephen J. Ubl, the president and CEO of PhRMA, said:

“Importing foreign prices will cut billions of dollars from Medicare with no guarantee that it helps patients or improves their access to medicines,”, said in a statement. “It jeopardizes the hundreds of billions our member companies are planning to invest in America, making us more reliant on China for innovative medicines.”

The U.S. Chamber of Commerce agreed with Trump’s view that foreign price controls unfairly shift price burden to the United States, but said the Executive Order’s solution is misguided. Tom Quaadman, the Chamber’s Senior Vice President for Economic Policy, said “the answer is not to import foreign government price control policies into the United States, but instead to pressure foreign governments to give up their price controls.” Quaadman added:

“Our studies have shown that patients in countries that have adopted price controls have access to fewer treatments and face significant delays in accessing many of the treatments that are available. Moreover, government price controls will stop or slow the development of new medicines.”

The order sets a 30-day timeline for the Secretary and other government actors to “communicate most-favored nation price targets” to pharmaceutical companies. If significant progress is not made following that communication, the order calls for the Secretary to propose rulemaking to impose such pricing and enforcement action, as necessary.