In an announcement on May 11, US President Donald Trump revealed plans to sign an executive order that will drastically reduce the cost of prescription drugs for Americans.
The order, set to be signed at 9:00 am (US EST) on May 12, will implement a “most favoured nation” (MFN) policy, which ties the US price of prescription drugs to the lowest price paid for the same medications by any other country in the world. Trump asserts that this move could cut drug prices by as much as 30 per cent to 80 per cent, offering relief to millions of American consumers who face some of the highest pharmaceutical costs globally.
In a social media post on Truth Social, Trump framed the move as a long-overdue correction to what he described as a rigged system that has burdened US citizens with excessively high drug prices. He explained that, while drug prices in the US are sometimes five to ten times higher than in other nations, American consumers have had little to no recourse.
Trump blamed pharmaceutical companies for using research and development (R&D) costs as a rationale for the pricing disparity, suggesting that these costs were disproportionately “borne by the ‘suckers’ of America, alone”.
“For many years, the world has wondered why prescription drugs and pharmaceuticals in the United States were so much higher in price than they were in any other nation,” Trump said in his social media post. “Sometimes being five to ten times more expensive than the same drug, manufactured in the exact same laboratory or plant, by the same company.”
The announcement came as a direct challenge to the pharmaceutical industry’s lobbying efforts and an ongoing debate over US drug pricing. The industry, led by trade group PhRMA, has consistently argued against government-imposed price controls, claiming they undermine innovation and hurt patients by limiting access to new treatments. Despite this, Trump insisted that the pharmaceutical sector’s arguments about the negative impact on innovation were embarrassing and unfounded.
According to Trump, this policy would not only ensure fairness for American consumers but would also bring about global pricing changes, leading to higher prices abroad in order to “equalise” the global pharmaceutical market.
“This is the kind of fairness we’ve been fighting for. The United States will finally be treated fairly,” Trump said in his post. “We will save trillions of dollars, and our citizens’ healthcare costs will be reduced by numbers never even thought of before.”
The background
The policy follows a pattern from Trump’s first term, when he sought to tackle drug pricing by introducing a “Most Favoured Nation” policy that would have linked the prices of certain drugs to those paid by other developed nations. The initiative, which sought to lower the price of drugs administered in doctor’s offices, was met with fierce opposition from the pharmaceutical industry and ultimately blocked by federal courts.
The Biden administration chose not to pursue the policy further, opting instead to include drug price negotiations for Medicare under the Inflation Reduction Act of 2022.
Trump’s latest announcement appears to build upon his earlier efforts, proposing a more expansive application of MFN pricing that could impact a broader range of drugs.
Despite the anticipated benefits for American consumers, the move has drawn sharp criticism from several quarters, including some senior Republicans and industry leaders.
Trump, however, dismissed these concerns, suggesting that the pharmaceutical industry had long manipulated the system to its benefit and that the costs of R&D were inflated as a means of justifying excessive drug prices. He emphasised that the policy would bring substantial savings to both the federal government and individual consumers, ultimately benefiting American taxpayers.
While the policy’s details remain unclear, it is widely expected that the MFN pricing would apply primarily to Medicare, the government health insurance program for seniors. Under the 2020 proposal, which was struck down by courts, Medicare would have paid the lowest price available for certain drugs among a group of 22 peer nations, including France and Japan.
The US pharmaceutical industry, however, strongly opposed the idea of linking US drug prices to those in other countries, arguing that foreign governments impose strict price controls that suppress competition and innovation. Drugmakers contend that higher prices in the US help fund research and the development of new therapies. Critics of the MFN approach argue that it would lead to higher costs in other countries and could result in shortages of certain medications.
The Trump administration’s 2020 proposal faced a similar backlash and was eventually blocked by federal courts. However, Trump’s team is determined to push the policy forward, citing the benefits to both American taxpayers and patients. Additionally, there is growing pressure within the administration to reduce the overall cost of prescription drugs, which remain one of the largest expenses for US households.
Challenges ahead?
It remains to be seen whether Trump’s new executive order will face similar legal challenges as its predecessor or whether it will be implemented without significant opposition. Experts warn that the road ahead could be fraught with legal hurdles, and some analysts remain sceptical about the effectiveness of such a policy.
As the situation unfolds, the debate over drug pricing in the US is likely to intensify, with both sides of the argument preparing for a lengthy legal and political battle. Whether Trump’s proposal succeeds in lowering costs for Americans remains uncertain, but one thing is clear: prescription drug prices will be a central issue for the foreseeable future.
For now, Americans are left wondering whether the president’s bold claims about cutting drug prices by as much as 80 per cent will materialise into a reality or if they will become yet another point of contention in the ongoing struggle over US healthcare reform.
(With inputs from agencies)