CED Newsletters & Policy Alerts

Policy Alert: Executive Order on Prescription Drug Pricing

May 15, 2025

Action: On May 12, the President signed an Executive Order seeking to lower the price of prescription drugs by implementing a “most-favored-nation” (MFN) pricing plan. The Order directs the Secretary of Health and Human Services (HHS) to communicate MFN price targets to pharmaceutical manufacturers within 30 days and bring prices to American markets in line with comparably developed nations. However, details including which drugs would be targeted and how the MFN price would be determined, were not announced. The Order also directs HHS to facilitate the sale of pharmaceutical products from manufacturers directly to patients at MFN prices, bypassing traditional intermediaries. Finally, the Order tasks the Secretary of Commerce and U.S. Trade Representative to address actions by foreign countries engaging in activities that suppress drug prices or impair US national security.

Key Insights

• This Order is the latest in the Administration’s efforts to address prescription drug pricing, a priority the President has publicly maintained since 2016. The President signed an Executive Order and released a corresponding fact sheet in April establishing the Administration’s broader policy objectives, characterizing it as an expansion of efforts including price transparency efforts, an insulin copay cap, and expediting generic drug approvals in his first term.
• Failure to implement MFN pricing would trigger regulatory actions against drugmakers, either from HHS under new regulations it will issue or enforcement activity from the Department of Justice and Federal Trade Commission to address anti-competitive practices. FDA could also review the approval process for a drug, and the Commerce Department can review drug or precursor material exports that may contribute to “global price discrimination.”
• Efforts to lower the price of prescription drugs have been made by both Democratic and Republican Administrations. The MFN pricing proposal has received sharp criticism, with opponents characterizing it as government price controls to help offset potential cuts to Medicaid.
• Drugmakers criticized a similar Executive Order proposing MFN pricing during the President’s first term, arguing the move stifled innovation and upended reimbursement programs to bolster patient access under Medicare. A Federal court blocked the Order for being issued without the required request for public comments.
• The Inflation Reduction Act includes several efforts to address the cost of prescription drugs and requires HHS to negotiate prices with drug companies for certain drugs covered under Medicare Part B and D. The Medicare Prescription Drug Negotiation Program remains in effect, with the Trump Administration proposing modifications to it outlined in the April Executive Order.
• As the Administration cited in the Order, recent research concluded that Americans pay significantly higher prices for prescription drugs in comparison to other high-income countries. This 2024 study, commissioned by HHS, found that prices across all drugs were approximately 2.78 times higher for Americans, with the gap persisting when factoring in rebate and reimbursement programs and even larger for brand-name drugs.