By Bhanvi Satija
(Reuters) -The U.S. Department of Health and Human Services said on Tuesday it was setting most-favored-nation prescription drug pricing targets following an executive order from President Donald Trump last week aimed at lowering the prices of branded medicines for U.S. consumers.
HHS wants U.S. prescription drug prices to drop to the lowest possible price among countries that are members of the Organisation for Economic Co-operation and Development, which includes most of the world’s largest economies.
The new pricing targets would focus on OECD nations that have a gross domestic product per capita of at least 60% of U.S. per-capita GDP, the department said.
Trump wants prescription drug prices to drop by between 59% and 90%. Wall Street analysts and legal experts have said his order would be difficult to implement and is likely to face legal challenges.
Trump tried in his first term to bring drug prices in the United States in line with other countries but was blocked by the courts. The U.S. pays by far the most for prescription medicines, often nearly three times more than those in other developed nations.
“The idea here is that within that set of fairly developed countries the U.S. wants to be the most favored nation,” said Yunan Ji, assistant professor at Georgetown’s McDonough School of Business.
Japan, Canada and some countries in Western Europe meet the 60% threshold that HHS has laid out. Smaller OECD nations like Estonia or Costa Rica would fall short of that criteria.
Ji said that a most favored nation pricing policy usually works in a small market, but if the U.S. tries to implement such a policy, it could change the “global equilibrium” since it is the largest prescription drug markets.
“It’s almost certain that drug manufacturers will have to renegotiate their contracts with other countries,” she added.
The U.S. also invests heavily in pharmaceutical research and development and drugmakers have said drastic price cuts would stifle R&D and innovation.
The agency said U.S. Health Secretary Robert F. Kennedy Jr. and Centers for Medicare and Medicaid Services Director Mehmet Oz will share their specific targets for medicine manufacturers in the coming weeks.
“We expect pharmaceutical manufacturers to fulfill their commitment to lower prices for American patients, or we will take action to ensure they do,” Kennedy said on Tuesday.
Trump’s order also directs the government to consider direct-to-consumer purchasing programs that would sell drugs at the prices other countries pay.
Drug company shares have been under pressure all year. The SPDR S&P Pharmaceutical exchange-traded fund is down nearly 5% so far in 2025, compared with a mild gain for the broader S&P 500.
(Reporting by Caroline Humer, Rami Ayyub, Katharine Jackson, Bhanvi Satija and Mariam Sunny; Editing by Doina Chiacu, Tomasz Janowski and Bill Berkrot)
