President Donald Trump signed an executive order Monday that he said will slash drug prices by approximately 59% or more and end global freeloading off of American investments in pharmaceutical research and development.
“For the first time in many years we’ll slash the cost of prescription drugs and we will bring fairness to America,” Trump said at the White House. “What’s been happening is we’ve been subsidizing countries around the world.”
The administration said the executive order would encourage drugmakers to charge more in Europe, evening out the prices paid for drugs internationally, which Trump described as “equalization.”
Trump was joined by Health and Human Services Secretary Robert F. Kennedy Jr., Food and Drug Administration Commissioner Marty Makary, National Institutes of Health Director Jay Bhattacharya and Centers for Medicare and Medicaid Services Administrator Mehmet Oz.
“This was an issue that people talked about but nobody wanted to do anything about because it was radioactive, they knew you couldn’t get it by Congress,” Kennedy said. “We now have a president who is a man of his word, who has the courage.”
Trump described the executive order at the White House Monday as “one of the most consequential executive orders in our nation’s history.” Trump previewed the action Sunday by calling it one of the most “important” and “impactful” announcements of his presidency.
“Our Country will finally be treated fairly, and our citizens Healthcare Costs will be reduced by numbers never even thought of before,” Trump said on Truth Social Sunday. “Additionally, on top of everything else, the United States will save TRILLIONS OF DOLLARS.”
Trump is “dead serious” about bringing down drug prices, a White House official told reporters Monday.
The executive order is an opening salvo in the administration’s negotiations with the pharmaceutical industry. The executive order takes a three-pronged approach: It will call for the U.S. Trade Representative and Commerce Department to run point on ensuring foreign countries are paying their fair share in pharmaceutical research and development. It will call for Kennedy to negotiate lower prices in direct-to-consumer sales with the industry akin to what European countries pay.
If pharmaceutical companies do not come to the table, the administration is poised to implement step three: “an aggressive suite of reforms,” the official said. These could include new rules requiring lower prices in Medicare Part B and Medicare Part D; tackling anti-competitive practices by the pharmaceutical industry through the Federal Trade Commission and the Department of Justice; exploring the reimportation of drugs; and restricting pharmaceutical exports.
Trump faulted the European Union for applying pressure on drugmakers to charge much less than in the U.S. market.
“They know they make more than enough money in the U.S. and so are often willing to sell to other countries slightly above cost of production, with American payers and taxpayers bearing a disproportionate burden of financing research and development,” the White House official said. “The U.S. alone will not be bearing that cost.”
Trump said he estimates drug prices could be cut by 59% or more.
The earliest actions will focus on the drugs with the largest taxpayer payouts and the largest price disparities.
U.S. taxpayers invest hundreds of billions in the basic research driving nearly every drug on the market through the National Institutes of Health: 354 of the 356 drugs that the Food and Drug Administration approved between 2010 and 2019, according to a 2023 study. The U.S. also subsidizes private R&D investment by paying the highest drug prices in the world. Other developed countries pay 24% of the list price that American patients and taxpayers are charged for drugs, according to an American First Policy Institute policy paper.
Yet the U.S. has a lower life expectancy than other developed countries like Germany, France, the United Kingdom, Japan, Italy and Spain, in part because of worse outcomes in cardiovascular diseases, chronic respiratory diseases and chronic kidney diseases.
The executive order could face a formidable battle from the pharmaceutical industry. Despite comprising just 5% of the global population, Americans generate roughly 64% to 78% of the profits of the pharmaceutical industry.
Stephen J. Ubl, president of PhRMA, the lobby for brand name drugs, called the executive action a “Foreign First Pricing scheme.”
Ubl said in a statement that the action could undermine another priority of the Trump administration: Investments by drugmakers in U.S. drug manufacturing.
“It will jeopardize the hundreds of billions our member companies are planning to invest in America, making us more reliant on China for innovative medicines,” Ubl said.
Ubl said that the administration should focus on manipulation of the 340B program for low-income hospitals and the rebates and fees paid to pharmacy benefit managers – which sometimes exceed the total cost of medicines in Europe – according to the trade group.
Trump also pledged to tackle the PBM “middlemen” in his remarks at the White House.
The new executive order executes on an ambition of Trump’s since his first term. A September 2020 executive order called for “most favored nation” drug pricing in Medicare Part B and Medicare Part D.
But the administration faced a compressed time frame in Trump’s final weeks in office and legal challenges from drugmakers and providers. CMS promulgated an interim final rule that slashed the prices of the most expensive Medicare Part B drugs.
The CMS Office of the Actuary estimated that most favored nation pricing on the priciest Part B drugs alone would have saved $85.5 billion in Medicare spending.
The Biden administration rescinded the rule in 2021.
“I just called the speaker of the House and I just called our leader in the Senate,” Trump said Monday. “I said when you score, you’re said you’re going to have to score two things. Number one, hundreds of billions of dollars of tariff money are coming in. And even bigger than that you’re going to have to score that your costs in Medicaid and Medicare, your pharmaceutical drugs are going down.”
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