The Trump administration has reignited tensions in global pharmaceutical markets by reintroducing a contentious pricing policy that ties United States drug prices to those paid in other developed economies. The executive order, unveiled on Monday, resurrects the so-called “most-favoured-nation” strategy — a trade-aligned approach that would cap prices paid across the US healthcare system at the lowest levels found in peer nations, primarily in Europe.
“Starting today, the United States will no longer subsidise the health care of foreign countries,” Donald Trump declared in his announcement.
Legal challenges expected from industry
The measure, previously blocked during his first term, is likely to face renewed legal challenges from drugmakers, who argue that price-setting authority lies with Congress under Medicare and Medicaid legislation such as the Inflation Reduction Act.
Critics, including senior Democrat Ron Wyden, warned that bypassing Congress renders the policy largely symbolic. “If Trump was serious about lowering drug prices, he would work with Congress to strengthen Medicare drug price negotiations, not just sign a piece of paper,” Wyden stated.
Industry backlash and investment risk
Industry response has been swift and forceful. The Pharmaceutical Research and Manufacturers of America (PhRMA) described the policy as a “bad deal for American patients and workers.” Chief executive Stephen Ubl warned it would “jeopardise the hundreds of billions our member companies are planning to invest in America – threatening jobs, hurting our economy and making us more reliant on China for innovative medicines.”
Wall Street analysts cautioned that linking US prices to international benchmarks may depress revenues across global markets. In response, pharmaceutical firms could withdraw products from lower-priced jurisdictions, increasing price volatility and access gaps across the global market.
Broader trade implications and regulatory questions
The executive order also tasks federal agencies with investigating nations that maintain low domestic drug prices and expanding drug reimportation from lower-cost countries — a move with significant trade implications. Analysts noted these directives could escalate tensions in global negotiations and further disrupt existing supply chains.
Merck & Co. chief executive Rob Davis reinforced the industry’s concerns during a recent investor call. “We don't want to lose the leadership we have in this important field, and that's what we're trying to advocate for as we work with the administration,” he said.
Uncertain legal footing and global market impact
Legal and logistical uncertainties remain. The previous iteration of the most-favoured-nation policy, introduced via the Center for Medicare and Medicaid Innovation, was halted by court rulings for not complying with the Administrative Procedures Act. While that decision did not rule on the substance of the pricing strategy, it raises doubts about the viability of implementing such sweeping changes via executive order.
As the pharmaceutical industry braces for potential revenue shocks and geopolitical ramifications, the re-emergence of this pricing policy introduces a new layer of uncertainty into international healthcare markets.