Overview of the Executive Order

On May 12, 2025, President Donald Trump, alongside NIH Director Jay Bhattacharya, announced a new executive order aimed at reducing prescription drug prices in the United States. This executive order introduces a “most favored nation” policy, linking U.S. drug prices to those in other developed countries.

Objectives and Scope of the Policy

The “most favored nation” initiative is designed to lower the prices of select medications by aligning them with lower prices observed abroad. This policy not only targets the commercial market but also encompasses public healthcare programs such as Medicare and Medicaid. While Trump claims potential price reductions could reach as high as 90%, experts are skeptical about the feasibility and extent of these cuts.

Expert Opinions and Industry Reactions

Healthcare analysts have expressed concerns regarding implementation challenges. According to JPMorgan analysts, the plan may require congressional approval and is likely to face legal pushback from pharmaceutical companies. Notably, several Republican lawmakers are already opposing the inclusion of such provisions in upcoming economic policy bills.

Despite the uncertainty, stock responses from major pharmaceutical companies indicated a moderate level of confidence, with shares of Gilead, Merck, and others increasing shortly after the announcement.

Potential Impact on Patients

While the administration asserts that patients could see price reductions soon, specifics about which drugs will benefit from these changes remain unclear. Experts have pointed out that without well-defined targets and conditions, the actual impact on consumers may be negligible.

The Pharmaceutical Sector’s Perspective

The pharmaceutical industry has raised alarms over the implications of such pricing policies. PhRMA has cautioned that enforcing price reductions could jeopardize future investments and research. Analysts have characterized the announcement as a “headline risk” more than a likely transformative policy, noting that for many drug companies, price changes will be voluntarily pursued rather than mandated.

Alternative Strategies for Drug Price Reduction

Some experts suggest that rather than implementing a sweeping policy, the Trump administration could utilize existing frameworks such as Medicare drug price negotiations to realize similar outcomes. The ongoing negotiations under the Inflation Reduction Act could be leveraged as a starting point for price discussions to facilitate lower costs effectively.