Trump enacts order to lower drug prices through most favored nations model

In May 2020, President Donald Trump issued an executive order intended to reform drug pricing in the United States by introducing a most favored nation (MFN) reimbursement model. This approach seeks to align the prices of branded pharmaceutical products with those of countries that have a GDP per capita at least 60% of that of the United States. Although specifics about the price targets were lacking, the policy aims to impose a price cap based on the lowest prices paid in selected peer countries. The MFN model would restrict payments to healthcare providers at no more than the lowest price drug manufacturers receive internationally. The announcement of this executive order sparked a mixed response, with critics labeling it as akin to socialized price controls, while supporters viewed it as a libertarian approach to controlling government expenditure on healthcare. The MFN framework was likely conceived to address the dramatic price differences between the U.S. pharmaceutical market and those of other developed nations. By utilizing prices from other countries to determine reimbursement rates, the administration hopes to lower overall healthcare costs. Despite its intentions, the MFN model faces numerous challenges including logistical and legal hurdles. Previous projects by the Center for Medicare and Medicaid Innovation (CMMI) have shown that implementing dramatic changes through executive orders can be complex and often slow. Furthermore, processing the substantial differences in drug approval and market dynamics across different nations complicates the establishment of consistent price indices. Key questions remain regarding whether this model will be mandatory or voluntary and how it would function in practice. The broader implications of Trump’s executive order suggest that permanent change in drug pricing will likely require cooperation from Congress. Analysts note that for long-lasting reform, congressional approval is often necessary, as many executive actions can be temporary and vulnerable to reversal by future administrations. However, the order may represent an essential step in the ongoing debate surrounding healthcare costs and drug pricing policy, potentially paving the way for future models and experiments in pricing structures.