US President Donald Trump issued an executive order Monday aimed at introducing “Most Favored Nation” (MFN) drug pricing, a policy designed to align US drug prices with those paid in other developed countries.
Under the executive order (EO), the Department of Health and Human Services (HHS) is directed to set target drug prices within 30 days. Over the following 180 days, pharmaceutical companies will enter negotiations with HHS — led by Secretary Robert F Kennedy Jr — to reduce US prices through a case-by-case process.
If those negotiations fail, the EO authorizes Kennedy to propose a rulemaking plan, potentially including international drug importation.
The directive has faced criticism from analysts. Jefferies says the order lacks clarity on implementation, and major hurdles such as litigation and regulatory uncertainty remain.
The biotech sector appeared to take the announcement in stride, with the XBI biotech ETF trading higher, as investors interpreted the news as “better than feared,” Jefferies said.
The reaction reflects a broader trend during Trump’s policy announcements, the firm added.
However, Jefferies noted that the details on such a rulemaking plan remain “vague.”
“It’s unclear whether the president and RFK have the power to implement MFN pricing without Congressional approval,” Jefferies said. “At best, it might be limited to a CMS pilot model or similar framework.”
The firm outlined two potential pathways for implementation: one would use the Centers for Medicare and Medicaid Innovation (CMMI) to test alternative payment models under the Affordable Care Act, which would bypass the need for new legislation and could be deployed more quickly. A second route could involve integrating international reference pricing into the Inflation Reduction Act negotiations, though changes under this process wouldn’t take effect until 2028.
“Even if negotiations begin in 2026, the IRA framework imposes a two-year delay before any price changes take effect,” Jefferies added.