Former President Donald Trump has issued a sweeping executive order targeting prescription drug prices, signaling a renewed push to lower costs through various federal programs and initiatives. This latest move revisits familiar territory, drawing parallels to his previous administration’s efforts, including the legally challenged Most Favored Nation model, and sets an ambitious roadmap for agencies to implement reforms ranging from Medicare and Medicaid payment adjustments to PBM oversight and FDA competition directives.
On April 15, former President Donald Trump issued an executive order (EO) titled “Lowering Drug Prices by Once Again Putting Americans First,” accompanied by a fact sheet detailing a wide array of proposed actions. This order signifies a significant re-engagement with drug pricing reform, a priority that dates back to his first term. However, the path to implementation is fraught with challenges, echoing past attempts that met with legal hurdles and political opposition.
Historical Precedent: The Most Favored Nation Model
The concept of linking U.S. drug prices to those paid in other countries is not new for the Trump administration. In late 2020, his administration unveiled the Most Favored Nation (MFN) model through the Center for Medicare and Medicaid Innovation (CMMI). This model aimed to lower Medicare Part B payments for certain high-cost, physician-administered drugs to match the lowest price charged in comparable foreign countries. The stated goal was to save American taxpayers and beneficiaries billions, addressing the disparity where Americans pay significantly more for prescription drugs than individuals in other high-income nations, as detailed in an HHS Office of the Assistant Secretary for Planning and Evaluation (ASPE) report. For instance, the top-selling Part B drug, Eylea, was found to be approximately twice as expensive in Medicare Part B compared to other countries, as reported by the HHS ASPE.
Despite its ambitious goals, the MFN model faced immediate legal challenges and was ultimately blocked by federal courts shortly after its announcement. The Biden administration later rescinded the policy in 2021. This history of judicial pushback underscores the complex legal and political landscape of drug pricing reform in the United States.
The New Executive Order: A Comprehensive Roadmap for Reform
The April 15 executive order outlines a broad range of directives, signaling a multi-pronged approach to drug pricing. Many of these actions build on previous administration priorities while introducing new initiatives. Key areas of focus include:
Improving upon the Inflation Reduction Act (IRA) Programs
The EO directs the Department of Health & Human Services (HHS) to issue guidance for the Medicare drug price negotiation program, which was established by the Biden administration’s Inflation Reduction Act. This guidance is instructed to “improve the transparency,” “prioritize the selection of prescription drugs with high costs,” and “minimize any negative impacts…on pharmaceutical innovation.” The accompanying fact sheet ambitiously states the intent to “eclipse the 22% in savings achieved in the program’s first year.” Additionally, the order calls for recommendations to stabilize and reduce Medicare Part D premiums and to work with Congress to address the “pill penalty” by aligning the treatment of small molecule drugs with biological products.
Medicare Payment Model Innovation
HHS is directed to develop and implement a rulemaking plan for a CMMI model aimed at obtaining “better value” for high-cost drugs covered by Medicare, including those not selected for the IRA program. This directive implicitly acknowledges the prior MFN model, with the instruction for a “rulemaking plan” potentially aimed at addressing the procedural defects that led to the MFN model’s legal injunction.
Medicaid Drug Payment Reform
The order instructs federal agencies to develop recommendations for Medicaid drug payment reform. These include ensuring accurate drug manufacturer rebates, promoting innovation in payment methodologies, linking payments to value, and supporting states in managing drug spending. The administration may look to build on programs like the cell and gene therapy (CGT) access model, which involves negotiations for outcomes-based rebates.
Additional Drug Payment Actions
Further directives include conducting a survey of hospitals to align Medicare payments for specified covered outpatient drugs (SCODs) with actual acquisition costs—an effort that previously failed due to a lack of such a survey. The EO also aims to tie insulin and injectable epinephrine costs for certain health centers to 340B ceiling prices plus a minimal administration fee, mirroring a rescinded rule from the prior administration. Finally, it seeks to evaluate and pursue rulemaking to prevent Medicare payment incentives from shifting drug administration volume from less costly physician offices to more expensive hospital outpatient departments, implying a focus on site-neutral payments.
FDA Initiatives and Competition
The Food and Drug Administration (FDA) is instructed to issue recommendations to accelerate the approval of generics, biosimilars, combination products, and second-in-class brand-name medications. Additionally, the EO calls for improving the process for reclassifying prescription drugs as over-the-counter (OTC) medications.
PBM Reform and Antitrust Measures
The executive order directs recommendations to address the role of “middlemen,” particularly Pharmacy Benefit Managers (PBMs), in the pharmaceutical supply chain. This includes improving employer health plan fiduciary transparency into PBM compensation. The Labor Department is specifically tasked with proposing regulations under ERISA to address this. The final section directs HHS to hold public listening sessions with the Federal Trade Commission, Department of Justice, and Department of Commerce to issue recommendations aimed at reducing anti-competitive behavior from drug manufacturers.
Skepticism and Challenges on the Horizon
Despite the comprehensive nature of the executive order, skepticism remains regarding its ultimate impact. Critics, such as those highlighted in a report by Reuters referencing the Financial Times, have labeled similar past efforts as a “big pile of nothing,” with one article specifically stating that Trump’s first-term rule “barely made it out of the White House” before being blocked by federal courts. Senator Bernie Sanders, a vocal proponent of drug price reform, has argued that the core problem is that Americans pay too much, not that other nations pay too little, and has predicted that Trump’s executive order will likely be “thrown out by the courts.”
The previous administration’s attempts to adjust 340B drug payment rates were deemed unlawful by the U.S. Supreme Court because HHS failed to conduct the statutorily required surveys of hospitals’ acquisition costs. This illustrates the legal pitfalls that new directives must navigate. The vagueness in promised savings, with Trump suggesting drug prices could come down by “between 59 and 80 and I guess even 90 percent,” further fuels skepticism.
New Probes and Potential Tariffs
Beyond the executive order, other initiatives suggest a hardening stance on international drug pricing. On April 1, 2025, the Secretary of Commerce initiated a Section 232 investigation into potential tariffs on pharmaceutical imports, with a subsequent request for public comments. Furthermore, reports indicate that the Trump administration is preparing a new probe under Section 301 of the Trade Act of 1974, specifically targeting drug pricing practices among U.S. trading partners. This investigation could lay the groundwork for fresh tariffs, building on past threats of imposing a 100% tariff on imports of branded or patented pharmaceutical products unless companies establish manufacturing plants in the United States. These actions underscore a persistent belief that foreign countries “underpay” for drugs, effectively subsidizing lower prices at the expense of American consumers.
Long-Term Implications for Patients and Industry
The directives outlined in the executive order, alongside the potential for tariffs, could have profound long-term implications. For patients, the promise is lower drug costs and increased access, particularly for life-saving medications like insulin and epinephrine. For the pharmaceutical industry, the focus on price negotiation, transparency, generic competition, and anti-competitive behavior could lead to significant operational and strategic shifts. However, the recurring pattern of legal challenges and political pushback suggests that achieving these ambitious goals will require careful implementation and potentially new legislative backing.
Ultimately, the scope and impact of these directives will depend heavily on how various agencies implement them and whether they can withstand legal scrutiny. The executive order reflects an ongoing commitment to a core priority of the Trump administration, but its success will be measured by its ability to deliver tangible results for American patients amidst a complex and highly scrutinized landscape.
