On May 12, 2025, the Trump Administration released Executive Order 14297, entitled “Delivering Most-Favored-Nation Drug Pricing to American Patients” (the Order).  The Order seeks to make available to American consumers the “most-favored nation lowest price” to end “global freeloading.”

The Order and a related fact sheet released on the same day assert that the prices Americans pay for brand-name drugs are more than three times the prices other OECD nations pay, even after accounting for discounts that manufacturers provide in the U.S.  They state that this has resulted from “a purposeful scheme in which drug manufacturers deeply discount their products to access foreign markets, and subsidize that decrease through enormously high prices in the United States.” They further assert that “[t]he inflated prices in the United States fuel global innovation while foreign health systems get a free ride.”

The Order states that, within 30 days (i.e., by June 11, 2025), the Secretary of the Department of Health and Human Services (HHS) will “communicate most-favored-nation price targets to pharmaceutical manufacturers to bring prices for American patients in line with comparably developed nations.”  The Order and fact sheet indicate that if drug manufacturers fail to offer most-favored nation (MFN) pricing in the U.S., the administration will take a series of additional steps.

HHS clarifies details of Order

On May 20, 2025, HHS posted a release stating that “the Department has identified specific targets pharmaceutical manufacturers are expected to meet,” and that “HHS expects each manufacturer to commit to aligning US pricing for all brand products across all markets that do not currently have generic or biosimilar competition with the lowest price of a set of economic peer countries.  The MFN target price is the lowest price in an OECD country with a GDP per capita of at least 60 percent of the U.S. GDP per capita.”  The release states that “President Trump and Secretary Kennedy look forward to highlighting [manufacturer] commitments in the coming weeks.” 

The HHS release provides some important details regarding the Order:

  • The Order applies to branded products without generic or biosimilar competition (presumably meaning marketed equivalent products). However, it is not clear how products that have generic or biosimilar equivalents marketed in other countries, but not it the U.S., will be treated.
  • The countries whose prices will be used to determine the MFN price are those in the Organization for Economic Cooperation and Development (OECD) having GDP per capita of at least 60 percent of U.S. GDP per capita—the same criteria that HHS specified for its MFN pricing model for Medicare Part B drugs in the first Trump Administration (85 Fed. Reg. 76180 (Nov. 20, 2020)), which was never implemented. At that time, HHS identified 34 countries in that group, ranging from the United Kingdom, Canada and Australia to countries across Europe as well as Israel, Turkey, Iceland, Chile and Columbia.
  • The target prices that manufacturers will be asked to offer reflect current lowest prices in these countries, rather than prices somewhere between U.S. prices and those lowest prices in the other countries. In announcing the Order, President Trump stated that he would seek to have other countries raise the prices they pay in trade negotiations, so that “everyone should equalize.  Everybody should … pay the same price.”  It appears that the Administration wants manufacturers to offer the current MFN price at least until other countries agree to price increases—if such increases ever materialize. While the President has threatened that additional tariffs will be imposed on imports from countries that do not agree to such increases, such tariffs would not appear to compensate manufacturers for offering current MFN prices.
  • The release states that the Order is “a central component of the Administration’s strategy to lower health care costs in the United States.”

The HHS release does not specify how it determined the target prices it will communicate to manufacturers. Prices paid in many countries include price concessions for coverage under national health systems or other payors, many of which are confidential.

Substantive provisions of the Order

The Order states that if, after these price targets have been communicated to manufacturers, “significant progress towards most-favored-nation price for American patients is not delivered,” a series of actions will be taken, “to the extent consistent with law”:

  • The Secretary of HHS “shall propose a rulemaking plan to impose most-favored-nation pricing[.]”  However, it is highly questionable whether HHS has statutory authority to impose broad-based MFN pricing by regulation, particularly for drugs not covered under Medicare or Medicaid. While the agency can currently test limited changes as Innovation Center payment models or under its demonstration authority for Medicare or Medicaid, use of that power to reduce payments for prescriptions drugs is likely to draw legal challenges.   
  • The Secretary of HHS and the Commissioner of the Food and Drug Administration (FDA) will consider actions to allow importation of lower-priced drugs under Section 804 of the Food, Drug and Cosmetics Act. 
  • If the report that the Federal Trade Commission and the Department of Justice are supposed to issue by mid-October under Executive Order 14273 (“Lowering Drug Prices by Once Again Putting Americans First” identifies anti-competitive behavior by pharmaceutical manufacturers, those agencies will, to the extent consistent with law, undertake enforcement actions against such practices.
  • The Secretary of Commerce and other relevant agency heads will review and consider action relating to the export of pharmaceuticals or the precursor material “that may be fueling the global price discrimination.”
  • The Commissioner of the FDA shall review and potentially modify or revoke approvals for drugs that may be unsafe, ineffective or improperly marketed.
  • The heads of agencies, in coordination with the Assistant to the President for Domestic Policy, will take all action available “to address global freeloading and price discrimination against American patients.”

These actions would primarily be directed against pharmaceutical manufacturers, rather than foreign nations.  Some appear to be threats to coerce manufacturers into lowering their U.S. prices – e.g., potential revocation of FDA approval of products. 

The Order also requires the Secretary of HHS to “facilitate direct-to-consumer purchasing programs for pharmaceutical manufacturers that sell their products to American patients at the most-favored-nation price”; the fact sheet adds that this will “bypass[] middlemen,” and President Trump also stated that “my administration will also cut out the middlemen.”  Given that several manufacturers have such direct-to-consumer (DTC) programs in place today, it is unclear what HHS actions are needed to “facilitate” them.  Moreover, while DTC programs can be designed to avoid payment of rebates to health plans and their pharmacy benefit managers – often characterized as “middlemen” – absent payment of such rebates, health plans may not cover drugs dispensed under such DTC arrangements.

Overall, the current announcements fail to address many of the complicated issues identified in the first Trump Administration’s 2018 “International Pricing Index” proposal that would have tied Medicare payment rates for Part B drugs to an average of national prices in 14 other developed nations (summarized in this Reed Smith Client Alert).  While the current Administration’s narrative places blame for differences in prices between the U.S. and other countries more on other countries than on manufacturers themselves, the potential impact of the current policy upon manufacturers may be greater than under the proposals made in the President’s first term, given that it appears to apply to all drugs, rather than only to drugs covered under Medicare Part B.

Nevertheless, absent congressional legislation authorizing the imposition of MFN prices – which the pharmaceutical industry and many in Congress still oppose – it remains highly questionable whether the Trump Administration will be able to impose any reduction of pharmaceutical prices to match those in other countries.

Reed Smith will continue to follow developments related to drug pricing regulation. If you have any questions about this executive order or the efforts to implement it, please do not hesitate to reach out to the authors of this post or to the health care lawyers at Reed Smith.