Introduction
On May 12, 2025, President Trump issued an executive order (the “Executive Order”) directing executive agencies and, imminently, pharmaceutical manufacturers to take steps to deliver most-favored-nation (“MFN”) prescription drug pricing to patients in the United States.1 This Alert provides an overview of the Executive Order and potential related future agency action.
Background
The Executive Order focuses on global differentials in drug pricing, noting that the United States has front-loaded the costs of global innovation, with foreign countries’ health systems getting a “free ride.” The stated purpose of the Executive Order is to stop American patients from paying higher prices for pharmaceutical products sold at lower prices in other countries.
The Executive Order thematically builds upon MFN policy initiatives advanced by President Trump in his first term. Most notably, in the final days of the first Trump administration, CMS issued an interim final rule implementing a mandatory nationwide MFN payment demonstration model (“MFN Model”) that would have lowered Medicare Part B drug reimbursement amounts to align with international pricing metrics for top-spend Medicare Part B drugs, starting with a cohort of 50 separately payable Part B drugs as of January 1, 2021.2 The MFN Model would have required all U.S. providers and suppliers that receive separate Medicare fee-for-service reimbursement for MFN Model drugs to participate in the MFN Model, with limited exceptions.3 The interim final rule was successfully challenged on procedural grounds by various stakeholders—including pharmaceutical manufacturers and health care providers who stood to have significantly disrupted Part B drug reimbursement.
Key provisions of the May 12, 2025 Executive Order are summarized below.
- Foreign Policy. The Executive Order directs the Secretary of Commerce and the U.S. Trade Representative to ensure that foreign countries do not engage in activity that “may be unreasonable or discriminatory,” “may impair [U.S.] national security,” or “has the effect of forcing American patients to pay for a disproportionate amount of global pharmaceutical research and development, including by suppressing the price of pharmaceutical products below fair market value in foreign countries.”
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MFN Pricing Targets for Pharmaceutical Manufacturers. The Executive Order directs the HHS Secretary, in coordination with the Assistant to the President for Domestic Policy, to communicate MFN “targets” to pharmaceutical manufacturers within 30 days (i.e., by June 11, 2025). Pharmaceutical manufacturers must then make “significant progress” towards MFN pricing for American patients. The order threatens additional regulatory actions if they fail to make such significant progress.
Specifically, the order directs the following actions if pharmaceutical manufacturers do not deliver significant progress towards MFN targets for U.S. patients:
- HHS will pursue rulemaking to impose MFN pricing;
- HHS, in collaboration with the Commissioner of the U.S. Food and Drug Administration (“FDA”), will take steps to further facilitate drug importation from other countries, likely building on earlier FDA efforts in this regard;4
- The U.S. Attorney General and Federal Trade Commission will pursue enforcement against anti-competitive practices by pharmaceutical manufacturers;
- The Secretary of Commerce will consider action relating to the exportation of drugs or precursor material that “may be fueling the global price discrimination”;
- The FDA Commissioner will review and potentially modify or revoke drug approvals for drugs that may be “unsafe, ineffective, or improperly marketed”; and
- Other agencies will consider actions to “address global free-loading and price discrimination against American patients.”
The Executive Order does not provide further detail regarding how HHS and the Assistant to the President for Domestic Policy will go about setting MFN targets, what constitutes “significant progress” towards those targets, or the specific nature or timing of penalties for failing to reach the targets. For instance, it is unclear how HHS will approach the accelerated, 30-day timeline for identifying MFN pricing targets, particularly in light of significant differences in pricing metrics across jurisdictions, with many net pricing figures being confidential. Further, drugs may be subject to different regulatory approvals and/or different corporate ownership in different jurisdictions.
Additionally, while the Executive Order focuses on U.S. patients’ costs for drugs, it does not address the role of payers or other intermediaries in delivering lower prices to U.S. patients, given that, traditionally, pharmaceutical manufacturers do not directly control drug prices borne by U.S. patients. Additional details on these items may become clear with the passage of time or pursuant to additional executive branch issuances, with all such future steps likely to be closely examined.
- Direct-to-Consumer Sales. The Executive Order also instructs the HHS Secretary to facilitate direct-to-consumer purchasing programs for pharmaceutical manufacturers that sell their drugs to patients at the MFN price. Although direct-to-patient sales models are emerging in the market, as mentioned above, prescription drugs in the United States largely are not sold directly to patients, but rather are made available through supply chain intermediaries, with patient out-of-pocket drug costs dictated by payers.
