On May 12, 2025, President Donald Trump signed the executive order (EO) “Delivering Most-Favored-Nation Prescription Drug Pricing To American Patients.” The EO sets forth policy positions that attempt to further rein in drug prices beyond the scope of drug price negotiation under the Inflation Reduction Act (IRA).
The concept of most-favored-nation (MFN) pricing has been proposed as a policy solution for years, including during the first Trump administration, but has never successfully been put into practice. The premise of MFN pricing is to ensure that government payors in the U.S. do not pay more than payors in other developed nations.
The stated aim of the EO is to ensure that the U.S. does not subsidize global R&D costs or allow manufacturers to offer lower prices in other countries.
Specifically, the EO calls for:
- The secretary of Commerce and the U.S. Trade Representative to address foreign practices that result in Americans disproportionately paying for pharmaceutical research and development (R&D), including combating unreasonable or discriminatory practices affecting U.S. national security.
- The secretary of Health and Human Services (HHS) to “facilitate” a direct-to-consumer (DTC) purchasing program for pharmaceutical manufacturers to sell their drugs to American patients at the MFN price.
- Within 30 days, HHS to communicate price targets to pharmaceutical manufacturers to align U.S. prices with those in other “comparably developed nations.”
If “significant progress” toward MFN pricing is not achieved, the EO then directs HHS to:
- Make a rulemaking plan to impose MFN pricing.
- Consider expanding the circumstances under which HHS will allow individuals to import prescription drugs from other developed nations.
Of particular note, the EO calls on various federal agencies to take aggressive action to address practices perceived to contribute to high drug prices in the U.S., including:
- Enforcement actions against anti-competitive practices.
- Review of the export of pharmaceutical drugs and precursor materials that may contribute to global price discrimination, ensuring fair pricing practices.
- Review of drug approvals to ensure they are safe, effective, and “properly marketed,” with potential modifications or revocations if necessary.
The EO follows another one issued in April 2025 also aimed at lowering drug prices. For more on the April EO, see our client alert “President Trump Issues Executive Order Intended To Lower Drug Prices.”
Looking Ahead
How the MFN directive will be operationalized remains to be seen. Similar to other policy objectives the administration has announced via EO, the implication is that pharmaceutical manufacturers will voluntarily come to the negotiating table. If IRA negotiations are any indication of the willingness of the pharmaceutical industry to submit to price negotiations, then litigation is likely the next step.
The administration appears to be tying MFN pricing to IRA negotiations in some sense. At the press conference announcing the EO, HHS Secretary Robert F. Kennedy Jr. pointed to a chart of the pricing spread of certain drugs while Centers for Medicare and Medicaid Services (CMS) Administrator Dr. Mehmet Oz narrated. The chart listed the difference in cost of 10 drugs in the U.S. and Europe that have already been selected for IRA negotiation.
The administration appears to be signaling its dissatisfaction with the price reductions achieved through the first round of IRA negotiations and its belief that MFN is a better approach.
The policy announcement raises major questions for pharmaceutical companies, including:
- Which types of drugs are implicated by the EO: brands, generics, biosimilars or some combination? The EO repeatedly references pharmaceutical manufacturers, mentioning biologics only once, but does not make clear if MFN pricing will be pursued for only reference products or their generic or biosimilar counterparts as well.
- What criteria will be applied to select the drugs subject to MFN requirements? According to the chart displayed by the administration, drugs that meet the IRA criteria for negotiation — namely, those that account for a substantial portion of Medicare spending — are being targeted. But it is unclear if Secretary Kennedy intends to set an MFN price for every drug on Medicare’s formulary, which would be a daunting task.
- How will rebates figure into the selection and analysis of targeted drugs? If the administration is basing its numbers on list price, it is understandable why prices may appear to be significantly inflated as compared to those in other developed nations. List prices in the U.S. do not reflect rebates paid by the manufacturers as well as other discounts under certain programs. Comparing the list price in the U.S. to a price that is set by a European Commission Health Technology Assessment, for example, is not an apples-to-apples comparison.
- Is DTC really the answer to increasing access to lower-cost drugs? The administration has referenced GLP-1s as the primary motivator for allowing DTC sales at MFN pricing. But many of the GLP-1 manufacturers already allow DTC sales at reduced prices. For patients with insurance coverage of the targeted drug, paying out of pocket through a DTC program, even at the MFN price, could still be more expensive than accessing the drug through the patient’s insurance plan.
- Why importation? One proposal detailed in the EO relates to waivers available for individuals to import drugs from other developed countries at lower prices. This would be done on a case-by-case basis and likely would not help bring down overall Medicare spending. It would give individuals who are able to navigate the waiver system the ability to bring back a supply of their prescription. But importation is not a widespread solution and would overburden an already resource-constrained FDA.
- Will FDA really revoke approvals? The EO contains language directing FDA to potentially modify or revoke approval of drugs found to be “improperly marketed,” among other concerns. Under the current statutory framework, withdrawal of approval is a lengthy and complex process that cannot be premised on “improper” marketing alone.
While the concept of MFN may cause some concern for drugmakers — especially smaller companies that may only have one or two marketed products — it remains to be seen how this process will be carried out or enforced. Even if HHS undertakes rulemaking to enforce MFN, that process could take years and likely will be subject to legal challenge. In addition, the administration had asked Congress to introduce legislation to effectuate this policy, and Congress declined to do so.
Negotiations for the second tranche of 15 drugs subject to the IRA are currently underway. It will be interesting to see if the administration starts with those 15 drugs, in addition to the 10 that were already negotiated, to begin the MFN process.
We will continue to monitor and provide updates as this process unfolds.
See the Executive Briefing publication
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