On May 12, President Donald Trump announced that he intends to sign an executive order linking US drug prices to those paid by other countries. The order outlines a “most favored nation” pricing model, under which the US government would base payments on the lowest price available in other developed markets.
The move follows a May 5 order focused on boosting domestic pharmaceutical manufacturing. That directive called on federal agencies to cut regulatory barriers for US-based production, expand unannounced inspections of foreign plants and assess supply chain dependencies for essential medicines. Put together, the two orders aim to reduce foreign reliance while tightening pricing oversight.
While no implementation details have been released, Trump claimed the pricing order could lower prescription costs by 30% to 80%. It is expected to apply to federal health programs, though it remains unclear whether it will target Medicare Part B, Part D, Medicaid or others.
The US continues to lead globally in drug prices. According to Reuters, new drug launch prices in 2023 were 35% higher in the US than the year before. Trump attributed this gap to US consumers disproportionately funding pharmaceutical R&D.
US prescription drug prices in 2022 were nearly 2.78 times higher than those in 33 OECD countries, which stands for high-income nations with advanced healthcare systems, often used as benchmarks in international drug pricing analyses.
Prices for branded drugs were at least 3.22 times higher, even after adjusting for estimated US rebates. In contrast, prices for unbranded generics in the US were lower — about 67 cents for every dollar spent elsewhere. The report, conducted by RAND using IQVIA MIDAS data, also found that generics made up 90% of US prescription volume, compared to 41% in the comparison countries.
The US generics market was supported by more than 32,000 FDA-approved products as of December 2024. The FDA had projected 694 generic approvals in 2024 alone, including 70 new market entries, with major players like Teva, Viatris, Sun Pharma, Aurobindo and Dr. Reddy’s at the lead.
Experts hint that aligning US prices with international benchmarks could affect global supply chains. India’s generics sector, which supplies much of the US market, may face reduced margins or shifting volumes as a result.
The announcement initially triggered market volatility, with major pharmaceutical stocks and exchange-traded funds (ETFs) — investment funds that track groups of drug company stocks — dipping before recovering. Analysts attributed the rebound to the absence of immediate implementation steps, which tempered expectations of near-term disruption.
The pharmaceutical industry remains critical of international reference pricing, citing risks to revenue, supply continuity and R&D investment. A similar Trump-era proposal in 2020, aimed at Medicare Part B, was struck down in court.
Companies like Roche have indicated that such policy shifts could impact future investment decisions. The firm cited the executive order as a factor potentially affecting its planned $50 billion US investment, noting concerns around pricing stability and long-term returns.
The May 12 pricing order also follows other recent steps by the Trump administration to reshape drug policy. In April, he directed the HHS to revise Medicare’s Drug Price Negotiation Program and streamline FDA approvals for generics and biosimilars.
However, some analysts remain skeptical that international pricing alone will substantially lower US costs. They point to deeper inefficiencies — such as opaque pharmacy benefit manager (PBM) arrangements and complex rebate structures — that remain untouched by the order.
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