• Trump's executive order aims to cap U.S. drug prices at the lowest rates paid by developed nations, including EU members.
  • Pharmaceutical industry warns of reduced R&D investment and potential supply chain shifts.
  • The policy, previously blocked during Trump's first term, faces likely legal challenges and industry pushback.

A Renewed Push for Drug Price Cuts

Former President Donald Trump has announced plans to sign an executive order requiring Medicare to pay no more for certain prescription drugs than the lowest price paid in any developed country, including those in the European Union. The so-called "most favored nation" policy—revived from his first-term agenda—could slash U.S. drug costs by 30%-80% "immediately," Trump claimed.

The move reignites a contentious debate over how aggressively the U.S. should regulate pharmaceutical pricing, with Trump accusing the EU of negotiating "brutal" discounts that force American consumers to subsidize global drug development. Medicare spending on affected drugs—primarily those administered in doctors' offices—could drop by billions annually if implemented.

Industry Warns of Consequences

Pharmaceutical companies swiftly condemned the proposal, arguing that pegging U.S. prices to international benchmarks would undermine profitability and discourage innovation. "This jeopardizes hundreds of billions in planned U.S. investments," said a spokesperson for PhRMA, the industry's leading lobby group. Analysts note that similar proposals in the past have triggered warnings about reduced drug pipelines and increased reliance on foreign manufacturers.

Market reaction was muted, as many investors expect legal delays to slow implementation. However, shares of some smaller biotech firms dipped on the news. The order notably excludes retail pharmacy drugs, focusing instead on physician-administered medications like chemotherapy and immunotherapy treatments.

Political and Practical Hurdles

The policy faces significant obstacles, including probable court challenges from drugmakers and logistical complexities in aligning U.S. reimbursement with fluctuating foreign prices. During Trump's first term, a version of this plan was blocked after failing to complete mandatory regulatory review processes.

European officials have previously defended their pricing systems as necessary to control healthcare costs. One EU trade representative, speaking anonymously, called Trump's characterization "misleading," noting that European governments negotiate prices based on cost-effectiveness analyses rather than arbitrary discounts.

Correction: An earlier version misstated the scope of drugs covered; the order applies specifically to Medicare Part B medications.