In a forceful move to tackle America’s soaring prescription costs, President Donald Trump on Monday signed an executive order demanding that pharmaceutical companies slash their U.S. prices to match the lower rates paid by other developed nations. Under the directive, drugmakers have 30 days to propose price targets—reductions of between 59 and 90 percent on key medicines—or face a series of escalating consequences, including tariffs on imports, expanded drug importation programs, and aggressive antitrust actions.
At a White House press briefing, Trump declared that “no American should pay three times what citizens of other countries pay for the same medication,” recounting a conversation with a private citizen who received a weight-loss injection in London for under \$100 yet paid more than \$1,300 for the identical treatment in the United States. “We’re ending the global rip-off of American patients,” the president said, vowing to deploy every tool at his disposal if pharmaceutical firms fail to meet “significant progress” toward the administration’s price targets.
Scope and Implementation
The executive order directs the Department of Health and Human Services (HHS) to calculate “most favored nation” reference prices, benchmarking U.S. costs against those in Germany, Japan, Canada, and other major markets. Within a month, HHS must publish a list of high-cost drugs targeted for immediate review, with the goal of aligning U.S. prices to no more than the lowest level paid by any peer country. If manufacturers do not voluntarily adjust their list prices, the administration will impose import tariffs sufficient to offset the difference.
Furthermore, the order empowers federal agencies to explore direct-to-consumer purchasing programs, facilitating cross-border drug imports from nations with government-negotiated pricing. It also calls on the Commerce Department to investigate export restrictions and supply-chain practices that contribute to U.S. price disparities. Senior White House officials indicated that these provisions could include authorizing Americans to purchase their prescriptions from Canadian pharmacies or European distributors, bypassing traditional U.S. wholesalers.
In parallel, the order tasks the Federal Trade Commission (FTC) with cracking down on anti-competitive practices by drugmakers. FTC commissioners are instructed to identify “sham” patent settlements—often called “pay-for-delay” agreements—where brand-name firms pay generics manufacturers to postpone cheaper alternatives from entering the market. The FTC will also examine exclusive distribution agreements, “rebate walls,” and other tactics that maintain high list prices.
During the press briefing, a senior administration official emphasized that “we will not hesitate to bring enforcement actions against any company that blocks competition or inflates prices through market manipulation.” The official noted that the FTC had already opened inquiries into several high-profile cases of suspected collusion in insulin pricing and the hepatitis C drug market.
Industry Pushback
Pharmaceutical trade groups were quick to condemn the executive order as an unprecedented overreach. The Pharmaceutical Research and Manufacturers of America (PhRMA) argued that importing foreign price controls would undermine U.S. innovation, threatening the hundreds of billions in research investments planned by the industry. “Aligning U.S. prices with countries that heavily subsidize healthcare would be a bad deal for American patients and jeopardize future cures,” said the organization’s CEO.
Industry leaders also warned of disruptions to the drug supply chain. They cautioned that aggressive price caps and importation mandates could prompt manufacturers to limit supply to the United States or withdraw certain products altogether, exacerbating drug shortages. Several companies have indicated they will challenge the order in court, setting the stage for a protracted legal battle over the administration’s authority to unilaterally impose international pricing benchmarks.
Stock prices of major pharma companies initially fell on concerns over the order’s potential impact but rebounded as analysts digested its practical implications. Wall Street observers noted that without clear statutory authority or implementing regulations, the administration may struggle to enforce the most aggressive provisions. “The order lays down a bold vision, but the devil is in the details,” said a healthcare strategist at a leading investment firm. “We expect months of rulemaking, negotiations with stakeholders, and inevitable litigation before anything truly changes on pharmacy shelves.”
The United States traditionally pays far more for medicines than peer nations. On average, U.S. list prices for brand-name drugs exceed those in Germany by 60 percent, Canada by 80 percent, and Japan by nearly 100 percent. Insulin—a poster child for U.S. affordability woes—sells for upwards of \$450 per vial in the United States, compared to under \$100 in many European markets. The administration’s order specifically lists insulin among the top candidates for immediate price aligning.
Experts note that these disparities arise from complex interactions among government price negotiations abroad, opaque rebate structures in the U.S., and the absence of direct government bargaining power here. Under current law, Medicare is barred from negotiating drug prices directly, a limitation the administration hopes to circumvent through executive action.
Trump’s executive order arrives at a politically sensitive moment. With midterm elections looming in November, roadside polling shows that prescription drug costs remain a top concern among voters across the political spectrum. By spotlighting dramatic price cuts, the administration aims to frame itself as the champion of everyday Americans, countering criticism that its economic agenda favors corporations.
Democratic lawmakers have cautiously applauded the goal of lowering drug prices but have expressed reservations about the use of executive authority. Some have called for broader legislative solutions, including granting Medicare the power to negotiate prices and capping out-of-pocket costs for seniors. Congressional leaders are weighing bipartisan proposals that would formalize price-negotiation mechanisms, though such bills face uphill battles amid sharply divided chambers.
Legal Hurdles Ahead
Legal experts predict a flood of challenges to the order, particularly over the “most favored nation” approach. Federal statutes governing drug imports and patent law impose strict limits on executive discretion. Health policy attorney Paul Kim warned that provisions allowing unapproved pharmaceutical imports may exceed the president’s authority under existing trade and public health laws. “Courts will scrutinize whether the administration can bypass Congress to implement such sweeping importation schemes,” Kim said.
The administration, however, appears prepared for courtroom fights. Senior officials believe that broad mandates from Congress—such as the requirement to prevent “unreasonable” drug price increases—provide sufficient legal cover. They also point to precedent where executive orders have catalyzed major regulatory changes in healthcare markets.
Implementation of the order will begin immediately, but substantive effects on patient bills are likely months away. In the next few weeks, HHS will issue guidance to drugmakers on setting initial price targets. Pharmaceutical companies will then face a choice: comply and sharply reduce list prices or engage in protracted negotiations and litigation. Meanwhile, the FTC and Commerce Department will advance rulemaking and enforcement plans.
Healthcare stakeholders are bracing for intense jockeying. Patient advocacy groups will press for rapid action, while industry trade associations mobilize legal resources. Insurers and pharmacy benefit managers must recalibrate formularies and rebate agreements. Hospitals and clinics may see shifts in drug purchasing contracts, affecting budgets and treatment protocols.
Whether the order ultimately achieves its aim of cutting American drug prices to foreign levels remains uncertain. For now, it represents the most aggressive attempt by a U.S. president to use executive power in the battle against pharmaceutical pricing—setting the stage for a high-stakes showdown between the White House and one of the nation’s most powerful industries.
(Source:www.economictimes.com)
At a White House press briefing, Trump declared that “no American should pay three times what citizens of other countries pay for the same medication,” recounting a conversation with a private citizen who received a weight-loss injection in London for under \$100 yet paid more than \$1,300 for the identical treatment in the United States. “We’re ending the global rip-off of American patients,” the president said, vowing to deploy every tool at his disposal if pharmaceutical firms fail to meet “significant progress” toward the administration’s price targets.
Scope and Implementation
The executive order directs the Department of Health and Human Services (HHS) to calculate “most favored nation” reference prices, benchmarking U.S. costs against those in Germany, Japan, Canada, and other major markets. Within a month, HHS must publish a list of high-cost drugs targeted for immediate review, with the goal of aligning U.S. prices to no more than the lowest level paid by any peer country. If manufacturers do not voluntarily adjust their list prices, the administration will impose import tariffs sufficient to offset the difference.
Furthermore, the order empowers federal agencies to explore direct-to-consumer purchasing programs, facilitating cross-border drug imports from nations with government-negotiated pricing. It also calls on the Commerce Department to investigate export restrictions and supply-chain practices that contribute to U.S. price disparities. Senior White House officials indicated that these provisions could include authorizing Americans to purchase their prescriptions from Canadian pharmacies or European distributors, bypassing traditional U.S. wholesalers.
In parallel, the order tasks the Federal Trade Commission (FTC) with cracking down on anti-competitive practices by drugmakers. FTC commissioners are instructed to identify “sham” patent settlements—often called “pay-for-delay” agreements—where brand-name firms pay generics manufacturers to postpone cheaper alternatives from entering the market. The FTC will also examine exclusive distribution agreements, “rebate walls,” and other tactics that maintain high list prices.
During the press briefing, a senior administration official emphasized that “we will not hesitate to bring enforcement actions against any company that blocks competition or inflates prices through market manipulation.” The official noted that the FTC had already opened inquiries into several high-profile cases of suspected collusion in insulin pricing and the hepatitis C drug market.
Industry Pushback
Pharmaceutical trade groups were quick to condemn the executive order as an unprecedented overreach. The Pharmaceutical Research and Manufacturers of America (PhRMA) argued that importing foreign price controls would undermine U.S. innovation, threatening the hundreds of billions in research investments planned by the industry. “Aligning U.S. prices with countries that heavily subsidize healthcare would be a bad deal for American patients and jeopardize future cures,” said the organization’s CEO.
Industry leaders also warned of disruptions to the drug supply chain. They cautioned that aggressive price caps and importation mandates could prompt manufacturers to limit supply to the United States or withdraw certain products altogether, exacerbating drug shortages. Several companies have indicated they will challenge the order in court, setting the stage for a protracted legal battle over the administration’s authority to unilaterally impose international pricing benchmarks.
Stock prices of major pharma companies initially fell on concerns over the order’s potential impact but rebounded as analysts digested its practical implications. Wall Street observers noted that without clear statutory authority or implementing regulations, the administration may struggle to enforce the most aggressive provisions. “The order lays down a bold vision, but the devil is in the details,” said a healthcare strategist at a leading investment firm. “We expect months of rulemaking, negotiations with stakeholders, and inevitable litigation before anything truly changes on pharmacy shelves.”
The United States traditionally pays far more for medicines than peer nations. On average, U.S. list prices for brand-name drugs exceed those in Germany by 60 percent, Canada by 80 percent, and Japan by nearly 100 percent. Insulin—a poster child for U.S. affordability woes—sells for upwards of \$450 per vial in the United States, compared to under \$100 in many European markets. The administration’s order specifically lists insulin among the top candidates for immediate price aligning.
Experts note that these disparities arise from complex interactions among government price negotiations abroad, opaque rebate structures in the U.S., and the absence of direct government bargaining power here. Under current law, Medicare is barred from negotiating drug prices directly, a limitation the administration hopes to circumvent through executive action.
Trump’s executive order arrives at a politically sensitive moment. With midterm elections looming in November, roadside polling shows that prescription drug costs remain a top concern among voters across the political spectrum. By spotlighting dramatic price cuts, the administration aims to frame itself as the champion of everyday Americans, countering criticism that its economic agenda favors corporations.
Democratic lawmakers have cautiously applauded the goal of lowering drug prices but have expressed reservations about the use of executive authority. Some have called for broader legislative solutions, including granting Medicare the power to negotiate prices and capping out-of-pocket costs for seniors. Congressional leaders are weighing bipartisan proposals that would formalize price-negotiation mechanisms, though such bills face uphill battles amid sharply divided chambers.
Legal Hurdles Ahead
Legal experts predict a flood of challenges to the order, particularly over the “most favored nation” approach. Federal statutes governing drug imports and patent law impose strict limits on executive discretion. Health policy attorney Paul Kim warned that provisions allowing unapproved pharmaceutical imports may exceed the president’s authority under existing trade and public health laws. “Courts will scrutinize whether the administration can bypass Congress to implement such sweeping importation schemes,” Kim said.
The administration, however, appears prepared for courtroom fights. Senior officials believe that broad mandates from Congress—such as the requirement to prevent “unreasonable” drug price increases—provide sufficient legal cover. They also point to precedent where executive orders have catalyzed major regulatory changes in healthcare markets.
Implementation of the order will begin immediately, but substantive effects on patient bills are likely months away. In the next few weeks, HHS will issue guidance to drugmakers on setting initial price targets. Pharmaceutical companies will then face a choice: comply and sharply reduce list prices or engage in protracted negotiations and litigation. Meanwhile, the FTC and Commerce Department will advance rulemaking and enforcement plans.
Healthcare stakeholders are bracing for intense jockeying. Patient advocacy groups will press for rapid action, while industry trade associations mobilize legal resources. Insurers and pharmacy benefit managers must recalibrate formularies and rebate agreements. Hospitals and clinics may see shifts in drug purchasing contracts, affecting budgets and treatment protocols.
Whether the order ultimately achieves its aim of cutting American drug prices to foreign levels remains uncertain. For now, it represents the most aggressive attempt by a U.S. president to use executive power in the battle against pharmaceutical pricing—setting the stage for a high-stakes showdown between the White House and one of the nation’s most powerful industries.
(Source:www.economictimes.com)
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