Trump’s Favored Nation Drug Pricing is Unworkable, Critics Say

Within 30 days, CMS is expected to communicate with pharmaceutical companies’ new price targets to align with prices in comparably developed nations as part of President Donald J. Trump’s new executive order. The Most Favored Nation rule the president signed this morning aims to “reduce drug prices by 30% to 80%.”

In a press conference this morning, Trump said the Most Favored Nation rule will lower prices immediately, and he would use “the power of the federal government to ensure that we are paying the same prices as other countries.” To do this, Trump said he will cut out “the middlemen” and facilitate the direct sale of drugs at the Most Favored Nation price directly to the American citizen.

He also indicated that “he will open up America's market to safe and legal imports of affordable drugs from other countries, putting dramatic downward pressure on prices,” and implement tariffs on countries that don’t make an effort to provide equal pricing. It also tasks the Secretary of Commerce and the United States Trade Representative to ensure other countries are enforcing the new rule.

Pharmaceutical industry leaders and policy experts have said Most Favored Pricing is flawed and unworkable.

Benjamin N. Rome, M.D.

“The idea behind the Trump administration’s push to ensure that prices for prescription drugs are not 3 times more expensive in the U.S. as in other countries has tremendous popular appeal,” Benjamin N. Rome, M.D., M.P.H., a faculty member of the Division of Pharmacoepidemiology and Pharmacoeconomics at Brigham and Women’s Hospital in Boston, told Managed Healthcare Executive.

“But I’m still scratching my head at exactly how this will work. Even if the government announces price benchmarks, it’s not clear why drug companies will voluntarily lower their prices to those levels,” Rome said. “The order also mentions facilitating ‘direct-to-consumer purchasing programs.’ I’m not totally sure what this will mean, but most people in the US cannot afford to purchase brand-name drugs directly. They rely on insurance coverage. So even if these programs worked as intended (which is a big if), they would not help most Americans afford their medications.

Darius Lakdawalla, Ph.D., and Dana Goldman, Ph.D., both with the USC Leonard D. Schaefer Institute for Public Policy and Government Service, said the rule ignores the basic economics of the global drug marketplace and places pricing decisions on foreign governments.

There has also been robust discussion of Most Favored Nation pricing on social media, with some calling this bad policy and an effort for price control.

Leaders from No Patient Left Behind, a nonprofit founded by patient advocates, policy leaders, and pharmaceutical leaders and investors, have said the rule will threaten innovation.

"It is the competitive U.S. market, not Canadian or European price controls, that drives the development of better treatments benefiting American patients and society first," Peter Rubin, executive director of No Patient Left Behind, said by email. "The Administration should defend the U.S. competitive market system, which enables the development of new, better treatments for American patients. U.S. market prices are, on average, about 70% below the societal value delivered by innovative medicines.”

Adam Fein, president of Drug Channels Institute, said in an X post that international reference pricing creates warped incentives. “Benchmarking U.S. drug prices vs. other countries ignores fundamental structural differences in healthcare financing, delivery, and value assessment frameworks.”

In a statement, John F. Crowley, president and CEO of the Biotechnology Innovation Organization, said the most favored nation executive order “is a deeply flawed proposal that would devastate our nation’s small- and midsize biotech companies—the very companies that are the leading drivers of medical innovation in the United States and the cornerstone of America’s biotechnology leadership.”

But B. Douglas Hoey, CEO of National Community Pharmacists Association, said in a statement that he applauds any effort to rein in pharmacy benefit managers.

"We urge President Trump to continue to focus on PBM middlemen and the way they artificially inflate the price of prescription drugs to pad their pockets," he said. "In fact, it is not a coincidence that the United States pays more for drugs than any other country, and we are the only country in the world in which PBMs are hired to control drug prices. We believe those two facts are directly related. The president correctly pointed out that PBMs are the only link in the supply chain that produces nothing of value for patients."

Trump has long favored this approach for lowering drug prices. During his first term, Trump had issued the Most Favored Nation Model rule. The model would have tested a program where CMS would pay for Medicare Part B drugs comparable amounts to the lowest price paid by any country in the Organization for Economic Co-operation and Development (OECD).

The rule was slated to begin Jan. 1, 2021. But the U.S. District Court for the Northern District of California issued an injunction after the Biotechnology Innovation Organization filed a lawsuit. Former President Joseph Biden withdrew the rule in December 2021.