Donald Trump is back at it, making big waves in the world of pharmaceuticals. On May 12, 2025, Donald Trump signed an executive order to cut U.S. prescription drug prices by linking U.S. drug prices to prices in other countries. In a post on Truth Social (Trump’s platform of choice), Trump promised that the U.S. will “institute a MOST FAVORED NATIONS policy” so that the “U.S. will pay the same price as the lowest paying country in the World”. In typical Trumpian exaggeration, he crowed Americans would see drug prices “REDUCED, almost immediately, by 30% to 80%” and that we would save “TRILLIONS OF DOLLARS”. It is an ambitious price reduction — and one that is being revived — to address Trump’s ever present issue with the fact Americans pay much more for some medicines than citizens of Canada or even Europe.
The Return of Most Favoured Nation Pricing
The new order is now essentially a return of “Most Favored Nation” (MFN) pricing, which Trump previously and unsuccessfully implemented in his first term. The structure, conceptually, is straightforward: cap U.S. drug prices at the lowest price of any other peer country. International reference pricing is not new, Trump attempted a similar program in 2020 but was stopped through litigation. In that effort, he focused on the most expensive drugs in Medicare and estimated U.S. taxpayer savings of $85 billion over seven years while providing access to lower-cost drugs. It never got off the ground. However, the concept lived on. However, with Trump back in the Oval Office and empowered by an “America First” mandate, MFN pricing is back in style as official policy. The executive order instructs U.S. health agencies to peg what the country pays for drugs to what prices are in other high-income countries — a major deviation from the status quo, more so because U.S. prices are sometimes three times higher than those in other developed countries.
What is, I think, particularly edgy about this resurgence is Trump’s open admission the rest of the world may have to adjust. “They are going to go up all over the World to equal and bring FAIRNESS TO AMERICA!”, he said of drug prices abroad. This means that if America is paying less, drug companies will be able to raise prices elsewhere as an offset. It will certainly receive lots of scrutiny when it is all done, however, there should be no ambiguity about the priority for the Administration: lower bills at U.S. pharmacies, no matter what the downstream consequences may be. The process will likely target Medicare — lobbyists believe the order will apply to more medicines than were included last year in the Inflation Reduction Act for price negotiation for Medicare. However, we just don’t know. Trump made sweeping promises without detailing any process. The hard work — and legal small print — will be left to health officials who have to figure out how to advance “fair” prices without collapsing the system. It is one thing to proclaim that we won’t pay more for insulin than France or Australia, it is another to turn that into actual practice.
Industry vs. Payers: Who Toasts, Who Dreads?
All of this is not without its dissenters. The drug industry fought back strongly, reliving its now familiar tale that any form of government price interference would be harmful to both innovation and patients. “Government price setting in any form is bad for American patients,” Alex Schriver, spokesman for PhRMA — the powerful lobby for drug makers. One executive said that Trump’s pricing proposal is “the largest, multifaceted existential threat to the industry and U.S. biosciences innovation.” In other words, for Big Pharma, this is not just an adjustment but a threat to their business model of high U.S. margins funding drug research. Wall Street took note. As more of Trump’s plan became clearer, shares of pharma began to tumble globally, with the U.S. pharma heavyweights Pfizer and Merck down approximately 2–4% and European drug makers with shares down over 3% apiece. In Japan, pharmaceutical shares were knocked down over 6%. The market is treating this as a real risk to future profits and potentially the large R&D budgets that depend on those profits.
On the other side of the ledger, payers and insurers are quietly smiling. For them, Trump’s order is essentially a gilt-edged cost cut. If both Medicare and private plans can pay European-level prices for cutting-edge therapies, the savings would be enormous, if the multiple middlemen allow it. Keep in mind that the U.S. spends over $400 billion a year on drugs, it is a tiny proportion of health spending, but still 30% off is a lot of spending power freed up.) For government health programmes, such as Medicare, the potential upside is almost experimental; as earlier mentioned, the MFN demo would have nearly cut Medicare pharmaceutical spending in half! It is hardly surprising that public support for reducing drug prices is a strong position that crosses party lines. Payers see an opportunity to potentially save some money, and patient advocates hope this may yield lower premiums or out-of-pocket costs — the question is, will it? That is less than clear. In theory, insurers could work to give that money back to their customers by also having lower premiums or by expanding coverage. But in practice, the real question is: what percentage of that windfall will be rebated to consumers after claim settlements at the pharmacy counter? The U.S. healthcare system is not exactly known for its rapid generosity. Any premium reductions will likely come slowly and through competitive pressure or regulation. Nevertheless, there is cautious optimism. At a minimum, it is believed that Medicare beneficiaries will see at least some reduction in their Part D premiums or out-of-pocket cost sharing if the government’s costs from expensive drugs come crashing downward.
Global Impact: Who Else Pays?
While President Trump’s executive order may proclaim “America First,” the shocks to the rubble of the global drug market are now outlined. Drug manufacturers do not simply sit tightly with lower revenues — they attempt to “equalise” lower prices by seeking additional money. So what happens if the U.S. says it will only pay what we pay for cancer drugs in the UK or Poland? For the manufacturer, what’s the easiest solution? Raise prices in the UK? Not likely; this would need a further Health Technology Assessment (HTA), which significantly influences drug prices, primarily through the National Institute for Health and Care Excellence (NICE) in England and the Scottish Medicines Consortium (SMC) in Scotland.
In particular, global health advocates are uneasy. Do we create upward price pressure in Europe or other high-income markets as companies seek to recover their U.S. losses? The early signs are indeed for upward price pressure. “This announcement is likely to have an impact on EU–US tariff negotiations… Is the U.S. president about to impose price caps on pharmaceutical imports rather than tariffs?” “If yes, this may have significant implications” for pharma companies and profits in Europe and perhaps elsewhere,” said one market analyst, pointing to possible trade friction if Europe is unwilling to change as well. In reality, European governments might very well push back against major price increases — they will not simply throw open the purse if U.S. policy changes. But pharma negotiators will “definitely” try to squeeze higher reimbursements from any country that has benefitted from significant discounting so far. The power dynamic in price negotiations could change: companies may tell EU health ministries, implicitly, “Pay up, or the consequences of America’s low price deal means we will no longer sell to you at a discount again.” Some even predict drug makers will delay the launches of new medicines, specifically in lower-price countries, to ensure that there is no “cheap” reference pricing that undermines their U.S. price.
This is not unprecedented. In Europe, international reference pricing has already been shown to influence delays in European access to new drugs in lower-income EU members. One study noted that international reference pricing caused about half of all delays in new drug launches in lower-income European countries (about one-year delays on average). In practice, a company might delay the launch of a breakthrough therapy in, say, Poland or Greece, until a higher price has been negotiated in Germany and France so these lower-price markets don’t pull down the global average. Trump’s global price peg could exaggerate these dynamics. If a U.S. reimbursement can be larger by any country offering a lower price, pharma companies will be even more resistant to lower prices. Low-income countries or lower-margin markets could be the hardest hit. They might have inflated prices, or they might simply be deprioritised — fewer affordable options, longer waits for new drugs, or products leaving those markets altogether. As one analysis suggested, manufacturers would be motivated to “reduce or even terminate the discounts they offer other countries”, putting pressure on those countries to pay significantly higher prices. Indeed, Trump’s own policy team has, essentially, recognised this trade-off: their expectation is other countries will, in our case, contribute more, i.e. pay closer to what Americans are paying. Great for the U.S. health dollar; not so great if you are a patient or an insurer in a country that, until now, benefitted from lower costs negotiated on a good-faith basis.
And what of patients in poorer countries? While Trump’s MFN model will likely primarily focus on high-income counterparts (no one would expect the U.S. drug price to be pegged to the lowest price for its product in sub-Saharan Africa, for example), there could still be spillover effects that might affect middle-income countries. Global health organisations fear if pharmaceutical companies cannot segment the market (i.e. more for rich countries and less for poor ones), they will stop doing business entirely in lower-profit markets. The unintended result of a goodwill reform of U.S. costs could be reduced access to innovative medicines in places that could least afford that reduction. As experts have cautioned, linking U.S. prices to other countries can result in “unintended complications, such as delaying drug entry in other countries and raising prices abroad.” Put bluntly, Americans may pay less, but some of that cost may just be shifted onto sick people elsewhere.
Where next on the outlook?
Will this policy be delivered to U.S. citizens? It is certainly possible, especially in the short run. If implemented quickly and thoroughly, Americans might see significant drops in many brand-name drugs — particularly, high-cost treatments for things like cancer, rheumatoid arthritis, and multiple other conditions where U.S. prices are considerably higher than in much of the world. But there is no free lunch. Someone pays the costs for drug research and manufacturing, and Trump is betting the rest of the wealthy world will pick up more of the costs so that Americans will have to pay less. Drug companies, not too surprisingly, will be all-out protecting their R&D budgets and profits — whether they do that by litigating (as they did the last time), negotiating harder against the health systems in Europe and Asia, or cutting costs somewhere else in their operations (like R&D, when their revenue estimates go south). The push-pull between the pharmaceutical industry and government will be furious.
For payers (like insurers and government programmes), this is clearly a nice win for them — it could potentially reduce the amount of money they spend. But whether or not American patients are able to see that in their pockets will depend on the details of implementation and ongoing enforcement at all levels. Reduced drug prices may translate into reduced insurance premiums and reduced taxpayer funding (in theory), provided the healthcare system appropriately passes along those savings. There is every chance that the opposite will occur. After all, the U.S. supply chain for drugs is complicated, with all of the middlemen, pharmacy benefit managers, and insurance entities taking their cuts. There would need to be heavy observation to ensure that price reductions at the highest level do not become additional profits for the next tier of entities in the long supply chain.
We will be watching carefully
Trump’s pharmaceutical international pricing order is a high-stakes experiment to reform drug pricing and challenge the pharmaceutical sector’s price-setting practices. It is also a step toward reclaiming some balance back to U.S. payers. It is also possible that, if implemented appropriately, it could mean that American patients have greater access to cutting-edge medicines at affordable prices if it can bring down what Americans pay for the same pills cheaper abroad. That is a relief many have been waiting for. It also exports the issue.
The neutral, critical reality is this: Someone pays for innovation. As is always the case with Trump, he talks a big game, but the end result remains to be seen. For now, Americans have been promised lower drug bills. The world will be waiting for the bill.
FINN Partners will be watching this develop and continue to analyse the situation.
