Most Favored Nation Drug Pricing Executive Order Resurrects Prior President Trump Policy

On May 12, 2025, President Trump signed the most recent Executive Order on drug pricing, Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients. This latest Executive Order simultaneously pushes key stakeholders (i.e. foreign governments and drug manufacturers) to modify their current practices while threatening potential most-favored nation (MFN)-based price caps and other scrutiny. The Executive Order Fact Sheet is available here. Here are four things to know:

1. The key buzzword for the Executive Order is “equalization.” Trump’s Executive Order (and the related news conference) makes clear that the Administration places the blame for high drug prices largely on the shoulders of foreign governments, who demand drug companies to sell their products at a significantly lower price. The Administration highlights that U.S. drug prices are often 5-10 x higher in the United States. President Trump highlighted that even for the Inflation Reduction Act-negotiated drugs, the negotiated pricing in the U.S. is higher than in similarly situated countries. According to the Administration, even though the U.S. population accounts for less than 5% of the world’s population, the U.S. is responsible for 75% of pharmaceutical revenues. During the press briefing for the Executive Order, Trump highlighted several times that these prices are the result of heavy-handed negotiation tactics by foreign governments, particularly the European Union.
2. President Trump directs the Department of Commerce and the U.S. Trade Representative to take measures to ensure that foreign countries are not acting in a way that is unreasonable or discriminatory and that may have the effect of forcing American patients to pay for a disproportionate amount of global R&D by suppressing the price of drug products below fair market value.
3. The Executive Order also directs the U.S. Department of Health and Human Services (HHS) to “facilitate direct-to-consumer purchasing programs for pharmaceutical manufacturers” that sell products to American patients at the most-favored nation price. In other words, we can expect to see some sort of incentive program or regulatory framework that would permit greater direct-to-consumer purchasing of drugs for manufacturers that use the MFN price. Notably, President Trump highlighted during the press briefing today that this is intended to “get rid of the middlemen” (i.e. Pharmacy Benefit Managers). There is no current statutory directive for this type of action, so any kind of new regulatory framework could raise Constitutional issues.
4. The Executive Order directs HHS, within 30 days of the Executive Order, to communicate MFN pricing targets to drug manufacturers. Note that the order does not specify whether the targets should apply to Medicare, Medicaid, or commercial pricing. If after these targets are issued, “significant progress towards most-favored-nation pricing for American patients is not delivered” (an undefined concept under the Executive Order) then the Executive Order directs the following:
   1. HHS will propose a rulemaking plan to impose MFN pricing – in other words, if the relevant stakeholders (foreign nations, drug manufacturers) do not act to equalize prices across nations that reflects MFN targets that HHS will announce, then HHS will create a rulemaking plan to impose MFN pricing. Any such plan would be subject to significant legal challenges, and it is unclear precisely how this would be implemented. Notably, President Trump’s first-term proposal to set Medicare Part B prices at an MFN-indexed amount was overturned in court as an over-extension of HHS’s authority to test new payment models. For this latest Executive Order, it is unclear whether the impact will be limited to Medicare Part B, Medicare Part D (whose prices are already negotiated between manufacturers and private health plans), Medicaid, or other government programs.
   2. HHS can consider certifying to Congress that drug importation by individuals for personal use does not pose an additional risk to public health & safety and will result in significant cost reductions, paving the way for the U.S. Food and Drug Administration (FDA) to define the circumstances for which it will “consistently grant” waivers for drug importation on a case-by-case basis. The logistics for implementing and executing such a program would be a challenge, especially with current staffing challenges at the FDA.
   3. FDA will review and potentially modify or revoke approvals for drugs that may be unsafe, ineffective, or improperly marketed. FDA, broadly speaking, already has the authority to do so under its drug and biologic approval and misbranding authorities; however, it is unclear whether the Executive Order means that FDA will be directed to scrutinize approvals for drugs that are not meeting the MFN targets highlighted above.
   4. The FTC and DOJ will undertake enforcement actions against anti-competitive practices by drug manufacturers.

Simply put, it appears that the Executive Order seeks to place the burden to “equalize” prices across countries compared to the United States first on the foreign countries that demand deep ex-U.S. discounts on prices and the manufacturers that acquiesce to these price demands. HHS will also identify MFN target pricing and even take steps to incentivize direct-to-consumer purchasing for certain drugs. If significant progress is not made (and the Executive Order does not define a timeframe for execution), the Administration will take other steps to enforce MFN pricing. 

This comes on the heels of last week’s Executive Order, Regulatory Relief to Promote Domestic Production of Critical Medicines, designed to eliminate regulatory barriers that inhibit domestic manufacturing of drugs by ordering FDA to review and streamline existing regulations, enhance the efficiency of inspections, and even subject foreign drug manufacturing facilities to increased scrutiny and fees.

This informational piece, which may be considered advertising under the ethical rules of certain jurisdictions, is provided on the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin or its lawyers. Prior results do not guarantee a similar outcomes.