For a moment, Donald Trump finally seemed to be on the verge of real economic populism. The president announced last week that his administration would be instituting a “most favored nation” policy that would peg drug costs in the United States to the much lower prices paid in other developed countries. “Some prescription-drug and pharmaceutical prices will be reduced almost immediately by 50 to 80 to 90 percent,” he declared. Robert F. Kennedy Jr., picking up on the horseshoe-theory dynamic, observed, “I have a couple of kids who are big Bernie Sanders fans. And when I told them that this was going to happen, they had tears in their eyes, because they thought this is never going to happen in our lifetime.”
Those tears might have been premature. When the text of Trump’s executive order became available, the actual policy turned out to be very different from what the president had claimed. In fact, it wasn’t really a policy at all. If the president were serious about solving America’s drug-cost crisis, he could choose from a long list of options. Instead, he seems content blaming foreign countries and hoping for the best.
The executive order directs Kennedy, the secretary of Health and Human Services, to identify a “price target” for a given drug, and then asks the pharmaceutical industry to voluntarily charge that price. There is no enforcement mechanism, only a vague promise to “propose a rulemaking plan to impose most-favored-nation pricing” if companies don’t comply. The order amounts to a strongly worded request that the pharmaceutical industry slash its own profit margins. Indeed, after the text of the order became public, drug-company stocks, which had dropped amid rumors of a real most-favored-nation policy, rebounded. “We see President Trump’s tone as relatively positive for the industry,” a pharmaceutical analyst for UBS Investment Bank wrote. “This is one of the least thought-through executive orders I’ve ever seen,” Stacie Dusetzina, a professor of health policy at Vanderbilt University, told me.
But even before the text circulated, Trump’s lack of seriousness should have been apparent. During the press conference announcing the order—the one that made RFK’s Bernie-loving children tear up—Trump conspicuously avoided directing any ire toward Big Pharma. “I’m not knocking the drug companies,” he said at one point. The real enemies, according to Trump, are European leaders who engage in hardball negotiations to lower drug prices for their own people, leaving the heroic American pharma industry with no choice but to charge American consumers exorbitant prices to make up for the shortfall. “It was really the countries that forced Big Pharma to do things that, frankly, I’m not sure they really felt comfortable doing,” Trump remarked. The result, he said, is a system in which American patients are “effectively subsidizing socialist health-care systems” across the world while our so-called allies free ride on our generosity.
The president went on to announce that the administration would launch investigations into “foreign nations that extort drug companies.” If those inquiries conclude that Europeans are paying below what Trump thinks are fair prices, he said, he will threaten to raise tariffs until they agree to pay more for drugs. Once foreign nations give in, American pharmaceutical companies will start making more money overseas, and thus will be happy to charge Americans lower prices. The result will be what Trump called “equalization”: higher prices for Europeans, lower prices for Americans, and steady profits for Big Pharma.
To describe this theory as economically illiterate would be too kind. Even if European countries did agree to willingly accept higher drug prices, to expect pharmaceutical companies to respond by charging American consumers less is delusional. Those companies would still be in the business of maximizing their profits. The real reason Americans pay so much for prescription drugs is that, unlike in basically every other rich country, the U.S. government mostly does not negotiate prices with drug manufacturers. The few exceptions are revealing. In 2022, the Biden administration passed legislation allowing the federal government to negotiate the prices Medicare pays for 10 top-grossing drugs. Last summer, new prices for those drugs, effective 2027, were announced, each more than 60 percent lower on average—an outcome that occurred without a single European country paying more.
Even if Trump ultimately follows through on the executive order’s threat to develop a most-favored-nation policy, that effort is almost assured to fail. The executive branch likely doesn’t have the authority to impose such a policy universally without congressional legislation. (When Trump, during his first term, tried to use executive authority to run a mere trial for most-favored-nation pricing within Medicare, the order was blocked by the courts.) Even if the courts decided that the authority existed, the policy’s fine print would have to be airtight so that pharmaceutical companies couldn’t easily game the system—by, for instance, raising the list prices of their drugs in foreign countries (while offering discounts and rebates) to avoid having to reduce prices in the U.S. That would be a tall order for the administration responsible for the chaotic “Liberation Day” tariffs. “When you decide to mess with a big, complex system like this, the small, technocratic details really matter,” Rachel Sachs, a health-policy expert at Washington University School of Law, told me.
Many more viable paths to lower drug costs are available. Most obvious, Trump could work with Congress to expand the federal government’s ability to negotiate drug prices—a policy that would also reduce the deficit or help offset the extension of the 2017 tax cut. If he’s hung up on the idea of most-favored-nation pricing, he could simply throw his support behind a bill introduced in 2021 by Bernie Sanders and Ro Khanna, which would permit manufacturers to make affordable generic versions of any drug whose U.S. price is above the median price in Canada, Japan, the U.K., Germany, and France. (If drug companies tried to game the system by raising prices elsewhere, the bill also lists a set of separate criteria that the HHS secretary could use to determine whether a drug is “excessively priced.”) Drug companies insist that cutting their revenues so dramatically would threaten innovation. The evidence for that proposition is mixed at best, but if Trump is worried about it, the government could boost public funding for research or offer cash prizes for certain drug discoveries.
Instead, of course, Trump is doing the opposite of all that. He has issued executive orders that will slow the implementation of Biden’s drug-price negotiations and halt investigations into how to reduce drug prices further. Meanwhile, his administration has already slashed billions in research funding for the National Institutes of Health—the institution responsible for the basic science research behind nearly every single new drug in the U.S.—and proposed a budget that would cut its funding even more. “This is exactly the kind of thing you’d do if your goal was to completely destroy drug innovation in the U.S.,” Dusetzina told me.
The unified Trumpian worldview sees nearly every problem in America as the product of foreign countries ripping us off. Trump would like voters to believe that high drug costs can be solved via some combination of tariff threats and trade restrictions. Whether he himself believes this is ultimately beside the point. Trump could deliver lower drug prices to the American people if he really wanted to. Instead, he’s offering snake oil.
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