May 12, 2025 09:00 AM PST
(PenniesToSave.com) – After decades of American consumers paying more for prescription drugs than any other nation, former President Donald Trump’s push to implement a “most favored nation” pricing policy is gaining renewed attention. The policy seeks to tie the price of prescription drugs in the United States to the lowest price paid by any other developed nation. Advocates claim this would finally bring fairness to a broken system that allows pharmaceutical companies to charge American patients two to three times more for the same medications available overseas. Critics argue that it could disrupt drug availability and pharmaceutical innovation. Regardless of perspective, the policy represents a bold effort to confront an issue that affects millions of American households.
Quick Links
- What is the “Most Favored Nation” drug policy?
- Why have Americans been paying more than other countries?
- How could this executive order affect the average household?
- What does this mean for Big Pharma?
- Could this create unintended consequences?
- How does this fit into Trump’s broader healthcare agenda?
What is the “Most Favored Nation” drug policy?
The “Most Favored Nation” policy proposes that the U.S. government will not pay more for certain prescription drugs than the lowest price paid by any developed nation. The term, commonly used in trade deals, implies equal treatment among global partners. In this case, it would force drug manufacturers to offer the United States the same pricing they give to the most cost-effective buyers around the world.
Originally introduced via executive order during Trump’s presidency in 2020, the policy was designed to apply to medications covered under Medicare Part B. It aimed to use international reference pricing to negotiate rates that reflect the best deals other nations receive. While the order faced legal hurdles and opposition from the pharmaceutical industry, it remains a blueprint for price reform and is still cited in policy debates today.
With the passage of the Inflation Reduction Act in 2022, which granted Medicare limited negotiation powers, the legal landscape has shifted, providing a foundation for the renewed implementation of the MFN policy. The executive order signed on May 12, 2025, directs the Department of Health and Human Services to develop and implement this pricing model within 60 days.
Why have Americans been paying more than other countries?
The high cost of prescription drugs in the United States is no accident. While most developed countries use centralized health systems to negotiate prices with drugmakers, the U.S. market operates differently. Until recently, Medicare was legally prohibited from negotiating prices directly. This left drug companies free to set higher prices without meaningful resistance.
In countries like Germany or Canada, governments act as sole purchasers or strong negotiators, which drives prices down. In contrast, the fragmented U.S. healthcare system consists of private insurers, pharmacy benefit managers, and government programs that have limited leverage. This system has resulted in Americans paying on average 2.5 times more for the same medications as patients in other nations.
Pharmaceutical companies defend the price gaps by citing the high cost of research and development. However, critics point out that much of this innovation is already supported by taxpayer-funded research through grants and federal subsidies. The pricing model has been less about recovering costs and more about maximizing profits in the largest consumer market in the world.
How could this executive order affect the average household?
For the average American family, Trump’s “most favored nation” order could lead to meaningful reductions in out-of-pocket drug costs. Seniors enrolled in Medicare Part B, many of whom rely on expensive injectable drugs, would likely see immediate financial benefits. These savings could extend to middle-class families who struggle with chronic conditions requiring regular prescriptions.
Households currently paying hundreds of dollars a month for medications such as insulin, arthritis treatments, or cancer therapies could experience relief if global price parity becomes law. Lower drug prices would also reduce the burden on federal healthcare spending, which could help stabilize Medicare premiums over time.
Critically, this policy touches every income bracket. Whether it is parents managing a child’s asthma, retirees affording heart medication, or younger workers with high-deductible plans, the ripple effect of lower costs could be substantial. It reinforces a central political message: that American citizens should not pay more simply because they live in the United States.
What does this mean for Big Pharma?
For the pharmaceutical industry, Trump’s proposal represents a serious threat to their pricing power. U.S. profits have long propped up global revenue models. Forcing price cuts in the U.S. would not only reduce margins but also set a precedent that other large markets might follow.
Pharmaceutical companies argue that linking prices to international rates would stifle innovation and lead to fewer new treatments. They also claim that countries paying less often do so by restricting access to newer or less-proven medications. They contend that American patients benefit from having broader access.
Critics of the industry, including many conservative economists, counter that the current system is bloated and riddled with middlemen. They argue that market forces have been suppressed by a combination of regulatory loopholes and monopolistic behavior. Trump’s proposal is framed as a way to inject fairness and transparency into a system that has disproportionately hurt American families while enriching corporate giants.
Could this create unintended consequences?
As with any sweeping policy change, unintended consequences are possible. One concern is that pharmaceutical companies could respond to reduced U.S. prices by raising prices in other countries, withdrawing drugs from less profitable markets, or limiting availability of some treatments in the U.S.
There is also the risk that cost reductions may affect research budgets. Critics warn that companies might scale back R&D spending, especially for rare diseases or less profitable conditions. However, others argue that pharmaceutical companies have maintained strong R&D pipelines even in price-restricted environments abroad.
Supply chain disruptions and slower drug rollouts could also follow if companies resist compliance or use legal challenges to delay implementation. Still, for many voters, the benefits of lower drug costs outweigh potential short-term hurdles. Supporters believe careful regulation and market incentives can mitigate these risks without abandoning reform.
How does this fit into Trump’s broader healthcare agenda?
Trump’s healthcare strategy has often centered on disrupting entrenched systems and appealing to middle-class economic anxieties. His efforts to increase hospital price transparency, reduce middleman rebates, and expand access to generic drugs all follow the same populist logic as the “most favored nation” rule.
Although many conservatives traditionally oppose government interference in private markets, Trump’s approach has found support by framing these actions as confrontations with bloated, unaccountable corporations. By positioning himself as a defender of the American consumer, Trump’s order aligns with his broader effort to show that government can work for the people without expanding federal control.
Even as legal and legislative battles continue, the symbolism of this policy resonates. It tells voters that paying less for lifesaving medication is not just possible. It is a priority. For many Americans, that message cuts across party lines.
Final Thoughts
Trump’s “most favored nation” executive order takes direct aim at a long-standing injustice: Americans paying far more for medicine than citizens of other developed nations. While the proposal faces obstacles, it highlights the financial strain that pharmaceutical pricing places on families and retirees. It also reflects a growing bipartisan appetite for reining in Big Pharma’s unchecked power.
Whether implemented under a Republican or Democratic administration, the core idea remains potent. Price parity for prescription drugs would mark a major shift in how America approaches healthcare economics. For now, Trump’s move remains one of the clearest efforts to center affordability, fairness, and global accountability in the national drug pricing debate.
Works Cited
“Donald Trump Vows to Lower US Drug Prices by up to 80%.” Financial Times, 11 May 2025, www.ft.com/content/b5a24dc2-2dc1-4690-8753-2e06f9395b23.
“Fact Sheet: President Donald J. Trump Announces Actions to Lower Prescription Drug Prices.” The White House, Apr. 2025, www.whitehouse.gov/fact-sheets/2025/04/fact-sheet-president-donald-j-trump-announces-actions-to-lower-prescription-drug-prices/.
“President Trump Announces Most-Favored-Nation Policy for Pharma Prices.” Pharmaceutical Executive, 11 May 2025, www.pharmexec.com/view/president-trump-most-favored-nation-policy-prices.
“Trump Promises to Order That the US Pay Only the Price Other Nations Do for Some Drugs.” AP News, 11 May 2025, apnews.com/article/35c281b542f0f3938489ee7e9360322b.
“Trump Renews Push for Most-Favored-Nation Drug Pricing. What It Could Mean.” Barron’s, 11 May 2025, www.barrons.com/articles/trump-most-favored-nation-drug-pricing-executive-order-3834d1ab.
“Trump Says He’ll Sign Executive Order to Lower Prescription-Drug Prices.” MarketWatch, 12 May 2025, www.marketwatch.com/story/trump-says-hell-sign-executive-order-to-lower-prescription-drug-prices-afdc5979.