President Donald Trump announced Sunday that he plans to resurrect a controversial policy from his first term that aims to reduce drug costs by basing payments for certain medicines on their prices in other countries.
His prior rule, called “Most Favored Nation,” was finalized in late 2020 but blocked by federal courts and rescinded by then-President Joe Biden in 2021. It would have applied to Medicare payments for certain drugs administered in doctors’ offices. However, it is unclear what payments or drugs the new directive would apply to.
In a Truth Social post Sunday evening, Trump said he plans to sign an executive order Monday morning that he argues would drastically lower drug prices.
“I will be signing one of the most consequential Executive Orders in our Country’s history. Prescription Drug and Pharmaceutical prices will be REDUCED, almost immediately, by 30% to 80%,” he wrote. “I will be instituting a MOST FAVORED NATION’S POLICY whereby the United States will pay the same price as the Nation that pays the lowest price anywhere in the World.”
The directive comes as the Trump administration is also looking to impose tariffs on pharmaceutical imports, which had been exempted from such levies enacted during the president’s first term. The tariffs could exacerbate shortages of certain drugs, particularly generic medicines, and eventually raise prices.
If the new executive order is comparable to the 2020 rule, both Medicare and its beneficiaries could see savings. But it could also limit patients’ access to medications, experts said. Much depends on how the policy is structured.
Although lowering drug prices was a major talking point of his first administration, Trump has not focused on the topic as much this term. And his campaign told Politico last year that he had moved away from the “Most Favored Nation” model, which many Republicans strongly oppose.
But the administration revived the idea recently as a potential way to meet deep spending cut targets for Medicaid in the House GOP’s sweeping tax and spending cuts package. However, it’s unclear whether the proposal will be included in the legislation, the details of which should be announced shortly, or whether it would be covered by the executive order.
The initiative will likely face stiff opposition from the pharmaceutical industry, which successfully halted the first iteration.
The Trump administration introduced the idea of tying Medicare’s drug reimbursements to the prices in other countries in 2018 and finalized the rule just after the 2020 election. The seven-year model would have allowed the US to piggyback on discounts negotiated by other peer countries, which typically pay far less for medications in large part because their governments often determine the cost.
Under the 2020 initiative, Medicare would have paid the lowest price available among those peer countries for 50 Part B drugs that are administered in doctors’ offices. The administration estimated it would have saved about $86 billion.
At the time, Medicare was barred from negotiating drug prices, but that changed with the 2022 passage of the Democrats’ Inflation Reduction Act, which gave Medicare the historic power to bargain over prices for a small number of drugs annually.
A “Most Favored Nation” proposal could save beneficiaries’ money in their out-of-pocket costs and their premiums, which are both affected by the price of drugs, experts said.
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