Implications of Trump’s Executive Order on Prescription Drug Prices

President Donald Trump announced via Truth Social that he would sign an executive order (EO) on May 12, 2025, aimed at reducing prescription drug prices by 30% to 80%. The EO is described as reviving the “Most Favored Nation” (MFN) policy from his first term, which sought to tie U.S. drug prices to the lowest prices paid by other high-income countries.

Trump claimed this would address the disparity where U.S. consumers pay significantly more for the same medications, sometimes 5-10 times higher than other nations. The policy is intended to apply to certain drugs under Medicare, though specific details on implementation or the scope of drugs affected were not provided in the announcement.

This initiative builds on Trump’s earlier efforts, as he signed an EO on April 15, 2025, to lower drug prices through measures like improving Medicare’s drug price negotiation program, aligning payments with hospital acquisition costs, and standardizing payments across care settings. That order aimed to eclipse the 22% savings achieved in the first year of Medicare’s negotiation program under the Inflation Reduction Act (IRA).

However, his first-term MFN proposal was blocked by a federal court and later rescinded by President Biden in 2021, raising questions about potential legal challenges this time. While the announcement generated significant attention, with some analysts praising it as a blow to Big Pharma, the lack of specifics makes immediate impacts unclear.

Implementation would likely require further rulemaking or congressional action, and drugmakers have warned that such policies could disrupt innovation. Experts note that while the IRA’s existing framework allows Medicare to negotiate prices (e.g., for 15 drugs in 2025, including Ozempic), achieving 30-80% reductions across the board may face logistical and legal hurdles. For instance, a previous Trump-era MFN plan was projected to save $85 billion over seven years but was halted before implementation.

The EO’s actual impact on drug prices will depend on its final text, how it navigates existing laws like the IRA, and whether it withstands potential court challenges. For now, no immediate price reductions are guaranteed, as such changes typically take time to materialize.

President Trump’s announced executive order (EO) on May 12, 2025, to lower prescription drug prices by 30-80% through a revived “Most Favored Nation” (MFN) policy carries significant potential implications, both economically and politically. Below are the key implications and the divides it may exacerbate. If successful, the EO could significantly reduce out-of-pocket costs for millions of Americans, particularly seniors on Medicare, who face high drug prices.

For example, drugs like Ozempic, currently negotiated under the Inflation Reduction Act (IRA), could see further price cuts. The Congressional Budget Office previously estimated the MFN model could save Medicare $85 billion over seven years, suggesting substantial federal savings if reimplemented effectively.

Impact on Pharmaceutical Industry

Drugmakers argue that price controls could stifle innovation, potentially reducing investment in research and development (R&D). The U.S. funds a significant portion of global pharmaceutical R&D, and lower prices could shift costs elsewhere or limit new drug development. Smaller biotech firms, reliant on high U.S. margins, may face greater financial strain compared to larger pharmaceutical giants.

The MFN policy requires complex rulemaking to align U.S. prices with international benchmarks, which could delay impact. The previous MFN attempt was halted by legal challenges, and similar lawsuits from drugmakers are likely. The EO may conflict with or overlap with the IRA’s existing Medicare negotiation framework, creating regulatory confusion or requiring congressional action to expand authority.

Lower drug prices could reduce healthcare costs overall, potentially easing inflationary pressures on insurance premiums and household budgets. However, job losses in the pharmaceutical sector or supply chain disruptions (e.g., shortages of generics) are possible if profit margins shrink significantly. Reducing drug prices is broadly popular, with polls (e.g., Kaiser Family Foundation, 2023) showing over 80% of Americans favor government action to lower costs.

Success could bolster Trump’s approval ratings and Republican electoral prospects. However, failure to deliver tangible results quickly could erode trust, especially among seniors who rely on Medicare and expect immediate relief. Tying U.S. prices to those in other high-income countries could pressure nations like Canada or European countries to raise their drug prices, potentially straining trade relations. Trump’s first-term MFN plan sparked concerns about U.S. “bullying” in global health policy.

Legal and Regulatory Battles

The pharmaceutical lobby (e.g., PhRMA) is likely to challenge the EO in court, as seen in 2020 when the MFN was blocked. Prolonged litigation could delay or derail implementation, creating a flashpoint in public discourse. The EO is likely to deepen existing divides across political, economic, and social lines. Trump’s EO positions Republicans as champions of lower drug prices, potentially co-opting a traditionally Democratic issue.

However, Democrats may criticize it as undermining the IRA, which they view as a landmark achievement. Some Democrats might support the goal but demand broader reforms, like expanding negotiations to private insurance. Free-market conservatives may oppose price controls as government overreach, while populist Republicans, aligned with Trump, see it as a win against Big Pharma. This could spark debates within the party over healthcare policy.

Patients and advocacy groups (e.g., AARP) will likely rally behind the EO, seeing it as relief from high costs. Conversely, pharmaceutical companies and investors may push back, warning of reduced innovation and economic lolosses. Arguments aready reflect this split, with some praising Trump’s “America First” stance and others defending Pharma’s role in drug development. Rural communities, often older and more reliant on Medicare, may see greater benefits, while urban biotech hubs (e.g., Boston, San Francisco) could face economic fallout from reduced industry revenue.

Seniors, who vote at high rates and depend on Medicare, are the primary beneficiaries, potentially widening generational tensions over healthcare priorities. Younger Americans, often on private insurance, may see less immediate impact unless the policy extends beyond Medicare. The EO taps into populist resentment against perceived corporate greed, framing Big Pharma as an elite adversary.