Reductions in Drug Prices Possible With Most Favored Nation Executive Order but Large Reductions Unrealistic: Q&A With Kathy Oubre, MS

In the first part of this Q&A, Kathy Oubre, MS, chief executive officer of the Pontchartrain Cancer Center, explained what the executive order signed by the president in May that aimed to bring "most favored nation" pricing to the US entails and whether his stated goal of reducing prescription drug prices in the US is realistic. Oubre also discusses how the US may see some benefit from the executive order if parts of it are implemented correctly.

This transcript has been lightly edited for clarity.

AJMC: In May, President Trump signed an executive order targeting “most favored nation” pricing, stating that his goal was to bring the cost of pharmaceuticals in line with the rest of the world. What does this executive order do to achieve this goal and what does it entail?

Oubre: In May 2025, President Trump signed the executive order titled "Delivering Most Favored Nation Prescription Drug Pricing to American Patients." The order is designed to align US drug prices with those paid by other developed countries by threatening pharmaceutical companies with stronger regulation if they fail to voluntarily lower prices. The new executive action echoes a similar one attempted by the Trump administration in 2020 that was blocked in court.

Here is what the executive order does and entails:

• Most Favored Nation (MFN) price targets: Within 30 days of the order, the HHS was instructed to determine MFN price targets for certain brand-name drugs. These targets reflect the lowest price paid for a drug in any comparable member country of the Organization for Economic Co-operation and Development with per-capita GDP of 60% or higher of the US
• Applicable drugs: The initial focus on MFN pricing applies to single-source brand-name drugs, meaning those without generic or biosimilar competition. This specifically covers prices charged to the government health programs, Medicare and Medicaid.
• Voluntary negotiations: The order initially allows for a 30-day period for drug companies to voluntarily lower their prices to meet the MFN price targets.
• Enforcement mechanisms: If drug manufacturers do not make "significant progress" toward lowering prices, the order directs HHS to pursue more aggressive actions. These include proposing a rulemaking plan to impose MFN pricing and taking enforcement actions against anticompetitive practices identified in a related report.
• Direct-to-consumer (DTC) purchasing: The order also instructs HHS to create programs that would allow American patients to buy drugs directly from manufacturers at the MFN price, effectively bypassing middlemen.

Kathy Oubre, MS

In July 2025, President Trump sent letters to 17 pharmaceutical CEOs after negotiations failed to produce satisfactory results. The letters emphasized the administration's frustration with the lack of progress and demanded that manufacturers commit to several specific actions by September 29, 2025. These include:

• Providing MFN pricing for all drugs to Medicaid patients.
• Guaranteeing MFN pricing for newly launched drugs to Medicare, Medicaid, and commercial payers.
• Establishing DTC purchasing programs for high-volume drugs.
• Repatriating increased foreign revenue to lower US prices.

The letters reiterated that if manufacturers do not comply, the administration is prepared to use every tool at its disposal to enforce price reductions. Legal challenges to the administration's authority to implement these price controls without congressional action are expected.

AJMC: The Trump administration claims that this executive order could reduce the price of drugs between 30% and 80%. How realistic is this statement? Is it possible we see prices lowering by smaller amounts if all the parts of the executive order are done successfully?

Oubre: Many consider the Trump administration's claim that its MFN executive order could reduce drug prices by 30% to 80% to be unrealistic. The policy faces significant legal, procedural, and market hurdles that would likely prevent such dramatic results. While some price reductions could occur if aspects of the order are successfully implemented, they would likely be far smaller and more limited in scope.

Why the 30% to 80% claim is unrealistic:

• Legal obstacles and challenges: A similar 2020 MFN order from the Trump administration was blocked by federal courts for failing to follow proper rulemaking procedures. The 2025 executive order will face similar legal challenges from the pharmaceutical industry if the administration again attempts to bypass these requirements.
• Vague implementation authority: The executive order directs the HHS to pursue MFN pricing but does not specify the legal authority for imposing such rules. Without specific legislative authority from Congress, any regulations could be challenged as an overreach of executive power.
• Voluntary participation from manufacturers is unlikely: The order first seeks voluntary compliance from drugmakers. However, the pharmaceutical industry is expected to fight mandated price reductions, as it did in 2020. If not legally compelled, manufacturers are unlikely to voluntarily cut prices so drastically.
• Risk of manufacturers raising foreign prices: To avoid lowering US prices, drug companies could raise prices in other countries, an outcome that would leave US patients no better off. The policy assumes foreign countries would allow such price hikes, but this is not guaranteed.
• Conflicting with existing drug price negotiation programs: The MFN policy could create conflicts with the Inflation Reduction Act's Medicare drug price negotiation program. These separate initiatives could frustrate each other's goals and add further administrative and legal complexity.
• Doesn't address most drug spending: A similar 2020 proposal was limited to certain Medicare Part B drugs, a small fraction of total national drug spending. If the 2025 version is similarly limited, it would have no direct impact on prices for many Americans.

Even with the significant hurdles, smaller price reductions are possible if parts of the executive order are successfully implemented.

• Targeted impact on Medicare and Medicaid: The most feasible approach for the administration would be to focus MFN pricing on federal programs like Medicare and Medicaid, where it has some existing authority. This would, however, not affect drug prices for those with private insurance.
• Pressure on manufacturers to negotiate: The threat of new regulation, even if legally uncertain, could still pressure some pharmaceutical companies to negotiate smaller price reductions or offer more favorable pricing terms to the government to avoid further conflict.
• Expanded importation programs: The executive order includes directives to streamline drug importation, particularly from Canada. If this succeeds, it could create modest, targeted price reductions for a limited number of drugs, though significant expansion has historically faced challenges.
• Antitrust enforcement: The order also encourages agencies like the Federal Trade Commission to act against anti-competitive behavior. Enforcement actions could target specific manufacturer practices that artificially inflate prices, leading to limited price reductions over time.