Trump Targets Prescription Drug Prices with New Executive Order
President Trump made headlines on Monday by signing an executive order aimed at slashing prescription drug prices for Americans by up to 90%. This move had an immediate impact, particularly on shares of companies he dubbed as “intermediate.”
At the White House ceremony, Trump stated, “We’ve been subsidized by other countries around the world,” asserting that this was one of his “most important orders.” He promised that prices for some medications could drop by 50%, 80%, or even 90% almost immediately.
This policy aims to revive Trump’s signature initiative known as the “most preferred country” approach. Analysts note that the U.S. has disproportionately borne the burden of research and development costs that are increasingly being shared by foreign nations.
Trump reiterated his criticisms of companies controlling pharmacy benefit managers, like CVS and Cigna, accusing them of distorting drug pricing. He emphasized, “I’m going to cut off the intermediary,” insisting that “everyone should pay the same price.”
The repercussions were swift: shares of Cigna dropped nearly 6%, while CVS Health, which owns Aetna, fell more than 3%. UnitedHealth Group saw a slight decline of less than 1%.
Notably, the U.S. pays significantly higher prices for prescription drugs—often nearly three times those of other developed countries. The executive order requires a 30-day notice for drug manufacturers to lower prices to match those in other countries.
White House officials have tasked U.S. trade representative Jamieson Greer and Commerce Secretary Howard Lutnick with combating “irrational and discriminatory policies” from foreign countries.
In approximately 30 days, Health and Human Services Director Robert F. Kennedy Jr. is set to define clear pricing reduction targets and initiate negotiations with industry leaders.
Trump indicated that if substantial progress isn’t seen in six months, he may pursue additional government actions, including possible tariffs. “If they don’t lower the prices, we’re going to consider using all the tools available,” he remarked.
The executive order, however, lacked specific details regarding which drugs would be affected. It also proposed allowing direct consumer imports of drugs and imposing restrictions on drug exports, both of which could face legal challenges.
Health policy attorney Paul Kim cautioned that the order’s import proposals exceed existing legal boundaries. Initial concerns about the feasibility of the “most preferred country” pricing policy caused some drugmaker stocks to decline, although the sector rebounded once analysts assessed the challenges surrounding its implementation.
Stephen UBL, CEO of the Pharmaceutical Research and Manufacturers of America (PHRMA), criticized the idea of importing prices from foreign countries, labeling it “a bad deal” for American patients and workers. He argued that high drug costs stem from various factors, including foreign entities not contributing fairly and intermediaries inflating prices for U.S. patients.
In fact, some companies saw gains amid the market response: Merck rose 5.9%, Pfizer by 3.6%, Gilead by 7.1%, and Eli Lilly by 2.9%.
The directive also urges the Federal Trade Commission (FTC) to strengthen its enforcement against anti-competitive practices, such as patent manipulation and delays in releasing generic alternatives.
FTC spokesman Joe Simonson commented, “President Donald Trump has campaigned on reducing drug costs, and today he’s doing just that.” Health and Human Services Director Kennedy expressed his surprise and support for Trump’s actions, noting it aligns closely with his prior advocacy for drug pricing reforms.
It’s worth mentioning that former President Joe Biden had previously overturned Trump’s “most preferred nation” policy. Biden’s approach under the Inflation Reduction Act aimed to establish a new drug pricing framework.
