President Donald Trump announced Sunday night that he will sign an executive order on Monday aiming to reduce U.S. prescription drug prices by linking them to the lower prices paid by other countries. The policy, known as the “Most Favored Nations” (MFN) rule, would ensure that the U.S. pays the same prices for drugs as the country that pays the lowest price worldwide. Trump referred to the upcoming order as “one of the most consequential” in U.S. history and promised that it would lead to a significant drop in drug costs, with reductions expected to range from 30 to 80%.
The executive order seeks to address the disparity in drug pricing between the U.S. and other nations, where government regulation often results in lower costs. While Trump did not provide specific details about which programs or drugs would be affected, the plan is set to spark a major confrontation with the pharmaceutical industry, which has historically resisted government price-setting measures.
Pharmaceutical Industry Pushback
The pharmaceutical industry has already voiced strong opposition to the proposed policy, arguing that it could harm American patients and undermine the U.S. healthcare system. Alex Schriver, a senior vice president at Pharmaceutical Research and Manufacturers of America (PhRMA), stated that government-imposed price controls are detrimental and suggested that U.S. policymakers should focus on improving the country’s healthcare system rather than adopting foreign policies that have failed elsewhere.
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Pharmaceutical companies, including major players like Eli Lilly, Merck, and Pfizer, have previously lobbied against such measures, arguing that the net price of their drugs in the U.S. – after negotiations with insurance companies and other intermediaries – is already much lower than the list price. These companies contend that comparing the U.S. list price to foreign government-set prices does not provide a fair picture of the actual costs Americans face.
Past Efforts and Future Prospects
This is not the first time the Trump administration has attempted to introduce a Most Favored Nations policy. In 2020, a similar rule was introduced as a pilot program through the Centers for Medicare and Medicaid Services (CMS) for Medicare Part B drugs. However, it faced significant opposition from the pharmaceutical industry and was eventually blocked in court on procedural grounds. The Biden administration chose not to pursue the policy, but Trump’s latest push signals a renewed effort to tackle high drug prices.
The MFN rule would likely deal a substantial blow to the pharmaceutical industry, particularly if it forces drug prices to align with those in countries with regulated pricing systems. Wall Street analysts have suggested that this policy could present a serious challenge for drugmakers, who are already grappling with other pressures, including the impact of tariffs and the Inflation Reduction Act.
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Despite the opposition, Trump’s new order is expected to have wide-reaching effects, potentially reshaping the way drug prices are determined in the U.S. If successful, it could lead to significant savings for American consumers, although it remains unclear how it will affect access to medications and the pharmaceutical industry’s willingness to invest in U.S. manufacturing.
Challenges Ahead
Despite the aggressive push for the MFN policy, experts and analysts have raised concerns about its feasibility. Some argue that the policy may face broader opposition beyond just the pharmaceutical companies. Healthcare providers and hospitals, for example, may object to the rule due to potential concerns about drug availability and access for patients. Additionally, analysts have pointed out that the policy could encounter legal and logistical hurdles that could delay or prevent its full implementation.
Trump’s executive order will undoubtedly spark a renewed debate over how to best address rising drug prices in the U.S. and whether linking U.S. prices to foreign rates is the right solution. As the order moves forward, it remains to be seen how it will impact both the pharmaceutical industry and American patients in the long run.
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