Trump Executive Order Could Reduce Pharmaceutical Costs by 59%

President Donald J. Trump is planning to sign an executive order that he claims will reduce prescription drug pricing by 59%, by bringing prices in line with what other countries throughout the world pay for the same medication.1 This move was previously blocked by the courts in the first term of the Trump administration.

Drug prices within the US are set through the use of pharmacy benefit managers (PBMs), which “act as intermediaries between pharmacies, health plan sponsors, pharmaceutical manufacturers, and wholesalers.”2 The 3 largest PBMs in the US helped negotiate approximately 79% of all prescription drug claims in 2024 compared with 52% in 2004. Reports have found that PBMs have inflated the cost of drugs, including overcharging health plans and payers through pricing schemes that are unclear as well as pointing patients to affiliated pharmacies rather than independent ones.

Former President Joe Biden had signed the Inflation Reduction Act (IRA) into law in 2022, which allowed for the government to bypass PBMs and negotiate prices directly for several drugs covered by Medicare Part B and Part D that cost the most to patients living in the US.3 Drug companies would be required to pay rebates to Medicare if they attempted to raise the price of their drugs faster than the rise of inflation under the IRA; insulin cost sharing was capped at $35 monthly for people on Medicare as well.

Planned executive order could reduce the price of drugs across the country | Image credit: Tyler Olson - stock.adobe.com

However, prices for drugs remain high and, according to Reuters,1 the negotiated prices under the IRA were more than double the prices of the same drugs in other countries. The executive order from the Trump administration aims to establish “most favored nation” pricing that the administration claims will reduce the price of drugs between 30% and 80%. A similar policy was introduced during Trump’s first term for drugs covered by Medicare Part B, though it is unclear how many drugs will be covered under this new executive order.4

The planned executive order directs the secretary of HHS, Robert F. Kennedy Jr, to encourage lower prices to drugmakers as well as set targets for price reductions in the country. Rulemaking could be used to lower drug prices if there hasn’t been progress made toward that goal. Expanding medication imports beyond Canada, considering export restrictions, and enforcing actions that would lower competition will also be included in the executive order.

The order is expected to meet resistance from the pharmaceutical industry, which claims that these price reductions will affect their ability to research new drugs and may hurt their profit margin. The pharmaceutical industry had previously sued the government over the earlier iteration of the policy at the end of the last Trump administration in 2020. According to PhRMA, the executive order would cost drugmakers up to $1 trillion over a decade, which would be in addition to any loss of profit through the tariffs on medicine imported to the US, announced last week.

With the planned signing of the executive order, it is unclear how much of it will stay intact after legal battles ensue and how these potential pricing negotiations could work in concert with those done through the IRA for Medicare.

References

1. Reuters. Trump to sign drug pricing executive order, promises 59% cut. Reuters. May 12, 2025. Accessed May 12, 2025. https://www.reuters.com/business/healthcare-pharmaceuticals/trump-says-he-will-cut-drug-prices-by-59-2025-05-12/
2. McNulty R. 5 things to know about PBMs’ influence on drug costs and access. AJMC®. August 2, 2024. Accessed May 12, 2025. https://www.ajmc.com/view/5-things-to-know-about-pbms-influence-on-drug-costs-and-access
3. Cubanski J, Neuman T, Freed M. Explaining the prescription drug provisions in the Inflation Reduction Act. KFF. January 24, 2023. Accessed May 12, 2025. https://www.kff.org/medicare/issue-brief/explaining-the-prescription-drug-provisions-in-the-inflation-reduction-act/
4. Constantino AK. Trump to sign order to cut some U.S. drug prices to match those abroad. CNBC. May 12, 2025. Accessed May 12, 2025. https://www.cnbc.com/2025/05/12/trump-drug-pricing-order-most-favored-nation.html