President Donald Trump has signed a sweeping Executive Order to align U.S. prescription drug prices with the lowest rates paid globally, igniting fierce debate over pharmaceutical profits and patient access.
At a Glance
- Executive Order mandates Medicare and Medicaid pay no more than the lowest international prices for certain drugs
- Targets Medicare Part B medications, including cancer treatments and injectables
- Pharmaceutical industry warns of reduced innovation and profit margins
- Biden administration previously halted similar policy over legal concerns
- Trump sets 30-day deadline for drugmakers to comply or face further action
Trump’s Executive Order Targets High Drug Costs
On May 12, 2025, President Trump signed an Executive Order introducing a “most favored nation” pricing model, aiming to reduce U.S. drug prices by aligning them with the lowest prices paid by other developed countries. This policy primarily affects Medicare Part B drugs, which are administered in clinical settings and include treatments for cancer and other serious conditions.
The administration projects that this move could slash drug prices by 30% to 80%, potentially saving American taxpayers trillions of dollars over the next decade.
Watch a report: Trump Signs Executive Order to Cut Drug Prices.
Industry Pushback and Economic Implications
The pharmaceutical industry has expressed strong opposition to the Executive Order, arguing that such price controls could stifle innovation and lead to reduced investment in research and development. Trade group PhRMA estimates that the policy could cost manufacturers up to $1 trillion over the next ten years.
Despite these concerns, the administration remains steadfast, with President Trump stating that Americans should not subsidize lower drug prices in other countries.
Legal Challenges and Policy Reversals
This policy revives a similar initiative from Trump’s first term, which was blocked by federal courts and later rescinded by the Biden administration. Critics of the previous attempt cited procedural issues and potential negative impacts on the pharmaceutical industry.
The current Executive Order includes provisions to address these legal challenges, but it is expected that the policy will face lawsuits from industry stakeholders.
Financial Markets React
Following the announcement, pharmaceutical stocks experienced volatility. Shares of major companies like Pfizer, Merck, and Johnson & Johnson initially dropped but later rebounded as investors assessed the potential long-term impacts of the policy.
Analysts suggest that while the policy could pressure profit margins, the overall financial health of the pharmaceutical sector remains robust.
Looking Ahead
The Executive Order sets a 30-day deadline for pharmaceutical companies to adjust their pricing structures. Failure to comply could result in further regulatory actions, including potential antitrust investigations.
As the administration moves forward with implementing this policy, the coming weeks will be critical in determining its effectiveness and the response from both the industry and the public.
