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In signing an executive order aimed at reducing U.S. drug prices, President Donald Trump said some prices would be cut in half or more “almost immediately.” But the order is light on details of how the plan would be implemented.
Trump said during a May 12 press conference that his administration would pursue a “most favored nation” drug pricing strategy, in which pharmaceutical companies selling drugs in the U.S. would be required to match the lowest price paid by other developed countries.
“Some prescription drug and pharmaceutical prices will be reduced almost immediately, by 50% to 80% to 90%,” Trump said. “Big Pharma will either abide by this principle voluntarily, or we’ll use the power of the federal government to ensure that we are paying the same price as other countries.”
The incentive for complying, Trump said, was that the U.S. would “help the drug companies with the other nations” via trade negotiations.
Tying U.S. drug prices to those in other countries is not a new idea, and some analyses suggest that the strategy could in theory lead to lower drug prices.
However, experts told us the plan, which is only loosely outlined so far, could face legal challenges. Past analyses have predicted that “most favored nation” pricing models would likely run into various practical challenges, such as efforts by drug companies to obscure how much foreign countries were truly paying for drugs, or companies pulling out of supplying certain drugs to other countries entirely.
“How this executive order will translate into lower prices that patients in the U.S. will pay for prescription drugs is pretty unclear,” Juliette Cubanski, deputy director of the program on Medicare policy at the health policy research group KFF, told us.
Here we answer questions about drug prices in the U.S. versus internationally, and about the potential implications of the executive order.
How much do drugs cost in the U.S. versus other countries?
During the press conference, Trump said the U.S. “has the highest drug prices anywhere in the world,” sometimes by “a factor of five, six, seven, eight times. … There are even cases of 10 times higher.”
Andrew W. Mulcahy, a senior health economist at RAND, a global policy research organization based in California, told us the first part of Trump’s claim is “broadly correct.” Prescription drugs are pricier in the U.S. than in other countries, according to a 2024 report he co-authored. But the overall price gap is not as high as Trump said.
On average, the RAND report found prices in the U.S. are 2.78 times higher compared with 33 other developed countries from the Organization for Economic Cooperation and Development, based on 2022 data. The gap is bigger when comparing brand-name drugs, which on average are 4.22 times pricier in the U.S. before adjusting for discounts by manufacturers. A fact sheet on Trump’s executive order correctly said that the net price people in the U.S. pay for brand-name drugs averages “more than three times the price other OECD nations pay.”
“For individual drugs, you can find examples of 5, 6, 7 or 8 times, or more, higher. But the actual average across all of the OECD countries and all drugs is in this 3 times range,” Mulcahy told us in a phone interview.
But Mulcahy said it’s important to note that Trump’s statement does not apply to generic drugs, which account for 90% of the prescriptions filled in the U.S. — “and our report finds that generics actually have lower prices in the U.S. than in most other countries.” Yet, generic drugs accounted for only 8% of U.S. prescription drug spending, while brand-name drugs accounted for 87% of the total spending in 2022, according to the RAND report.
Trump gave examples to illustrate how much more people in the U.S. pay for prescriptions. For instance, he said Ozempic, a drug for people with type 2 diabetes that’s also prescribed off-label for weight loss, costs 10 times more in the U.S. than in the “rest of the developed world.”
According to a KFF analysis, the list price for one month of Ozempic in the U.S. as of 2023 was about 10 times more than in Sweden, the U.K., Australia and France. The list price was about five to six times higher than in Japan and Canada. But list prices are not necessarily what patients or insurers pay, as they don’t include rebates to insurers or coupons to patients, KFF noted.
Joshua P. Cohen, an independent consultant who focuses on health care policy and pricing, told us that “Trump told half-truths” during the briefing “not entirely consistent with the reality on the ground.”
Cohen said that in the U.S., “prices consumers pay vary enormously for Ozempic and weight loss drugs like Wegovy (has the same active ingredient as Ozempic) depending on their coverage and eligibility for certain discounts off of the list price. In some cases patients only pay $25 a month; in others $1,000.”
Cynthia Cox, a KFF vice president who has studied international data on drug prices, told us most of the comparison data available is on “certain very high-cost drugs, which do drive a lot of total spending.” But “a big caveat” when comparing these prices, she said, is that there’s “not very good” data on drug rebates, coupons and other discounts made by manufacturers, which “might” be more available in the U.S.
“So while the sticker price might look much higher in the U.S., it’s possible that pharmaceutical benefit managers are negotiating steep discounts and so those sticker prices may not be what the insurance company is actually paying for the drug,” said Cox, who directs the Peterson-KFF Health System Tracker Project that compares the U.S. health system with those in other countries.
Cox said that a December 2024 Peterson-KFF analysis gets around “a lot of these problems” and is able to do a “true apples to apples comparison” of drug prices negotiated by Medicare with drug prices in peer nations, however.
When we asked the White House about Trump’s price comparisons, a spokesperson directed us to that same analysis, co-authored by Cox.
Under the Inflation Reduction Act, signed by former President Joe Biden in 2022, Medicare was allowed to negotiate prices for the first time, for some high-cost drugs. The Peterson-KFF analysis showed that for the first batch of 10 brand-name drugs, the Medicare negotiated price was still higher than the average price for 11 comparable countries. At the May 12 press conference, the administration presented a similar chart on those 10 drugs, which closely matched the Peterson-KFF analysis.
Trump used the comparison to criticize Biden, saying that “five out of the 10 drugs that he negotiated are now over 200% more expensive in America than the rest of the world, and far more expensive than when he even got involved, much more expensive than when he got involved.” That distorts the facts.
Five of the 10 drugs are still 200% more expensive for Medicare, compared with the average for comparable countries, but the Peterson-KFF analysis showed that Medicare did negotiate price reductions. It found that the new prices were “on average 22% lower than current net prices in Part D,” Medicare’s prescription drug program, and lower than the prices negotiated by the Department of Veterans Affairs.
The Congressional Budget Office estimated that the Medicare drug negotiation provisions of the 2022 law would save $98.5 billion over 10 years.
Why are drug prices higher in the U.S. than in other countries?
The Trump administration’s explanation for higher drug prices in the U.S. is that manufacturers overcharge the U.S. to be able to reduce their prices in other countries while still covering research and development costs. The executive order said the “egregious imbalance” in drug pricing “is orchestrated through a purposeful scheme in which drug manufacturers deeply discount their products to access foreign markets, and subsidize that decrease through enormously high prices in the United States.”
“Other countries should pay research and development too,” Trump said, blaming both the drug companies for “price-gouging” and other countries that he said “forced Big Pharma” to offer them lower prices. The goal of the executive order is to lower prices and stop “foreign free-riding on American pharmaceutical innovation,” according to the administration’s fact sheet.
Yet, the experts we spoke with told us there are various factors that make prescription drugs in the U.S. more expensive. As the Peterson-KFF analysis explains, the U.S. has a fragmented health care system of multiple payers, including Medicare, the largest payer, and commercial insurers that each negotiate their own prices.
“In other countries, there’s reference pricing or other kinds of direct regulation of drug prices, where their governments are playing a significant role in the prices that are paid for prescription drugs, and often for other services too, like hospital care or doctor visits,” KFF’s Cox told us.
Mulcahy, the health economist from RAND, told us “there’s very little evidence to actually support” the notion that other countries are getting a free-ride while prices in the U.S. have to be higher to fund global R&D efforts – which has been “a talking point from Pharma for a long time,” he noted.
“Other countries have lower prices for brand-name drugs in large part because they do research and analysis and have government bodies, or quasigovernmental bodies, that weigh in on what a fair price for a drug is,” he said. “In the U.S. we don’t do that — we let drug companies start the pricing process at wherever they want.”
According to the Peterson-KFF report, another factor that leads to price differences is the existence of generic drugs that can replace more expensive brand-name drugs in other countries. Those generics may not be available in the U.S. due to “[d]ifferences in U.S. and international patent laws, as well as differences in the regulatory groups that approve medications for public use,” the report said.
Other key factors, according to the report, include how drug prices are set. “For example, while Medicare evaluates the costs to manufacturers to research, develop, and produce the drug when setting prices, only two of the 11 comparable countries also consider these factors,” the report said. In addition, eight of the 11 comparable countries use drug prices in other countries as a reference for setting their own prices, while Medicare doesn’t.
Mulcahy said the administration’s argument about “free-riding” on the part of other countries may not be the case. “And what’s really just happening is other countries have policies to tackle high drug prices and the U.S. doesn’t,” he said. “And maybe, unsurprisingly for profit-maximizing companies, drug companies take advantage of that and set higher prices in the U.S.”
What does the executive order do?
The executive order proposed a “most favored nation” drug pricing policy, which could lower drug prices in theory, experts said. However, the current order lacked specifics on how many aspects of the plan would be carried out.
It calls for the Health and Human Services secretary to “communicate most-favored-nation price targets to pharmaceutical manufacturers” within 30 days of the order. If there isn’t “significant progress” toward reaching those prices, the secretary “shall propose a rulemaking plan to impose most-favored-nation pricing.”
“There really aren’t many details specified in this executive order as far as how these proposals for ‘most favored nation’ pricing will be implemented,” Cubanski, the Medicare policy expert at KFF, told us.
For instance, she said, the executive order does not specify which countries exactly will be used to set the target prices, which drugs will be targeted and how the new prices will interact with the current system the U.S. has for paying for drugs, via private insurance, Medicare, Medicaid and other payers.
It’s also not clear how the administration will compel drug companies to lower their U.S. prices if they do not voluntarily do so. The order is not specific about what the HHS secretary’s rulemaking would entail.
The order also said that in the event of noncompliance, the U.S. could allow “low-cost” drugs to be imported, take action against anti-competitive practices, “modify or revoke” drug approvals, and take action “regarding the export of pharmaceutical drugs or precursor material that may be fueling the global price discrimination.”
It’s unclear what enforcement mechanisms the administration has the legal authority to carry out, Cubanski said.
“Certainly it’s within the purview of the executive branch to issue rulemaking,” she said. “But the executive order outlines other actions that go beyond just rulemaking and seem to call for unspecified administrative actions by the Commerce Department and the [Federal Trade Commission] and other federal agencies that I just don’t know exactly what steps they will take or will have the power to take to address the so-called global freeloading on prescription drugs.”
The executive order also directed HHS to “facilitate direct-to-consumer purchasing programs for pharmaceutical manufacturers that sell their products to American patients at the most-favored-nation price.”
But Cubanski said the executive order does not explain what sort of system for direct-to-consumer drug sales the administration is proposing, what drugs would be offered via this platform and how many people it would benefit, given that most Americans have benefits via insurance that reduce their out-of-pocket costs for drugs. “If there were a new system of direct-to-consumer prescription drug sales, it might be beneficial for patients without insurance,” she said.
The order said the Commerce secretary and U.S. trade representative also will look into whether other countries are using “unreasonable or discriminatory” measures that lead to higher drug prices in the U.S. and below-market prices in those countries.
Rena Conti, a health economist at Boston University, emphasized to us via email what the executive order did not do.
The order could have directed HHS to immediately draft rules to require “most favored nation” pricing, she said, via parts of the Affordable Care Act that allow the Centers for Medicare & Medicaid Services to test new payment models. She also noted the absence of any language in the executive order directing Congress to propose such a policy or “build on the existing success of the IRA drug affordability provision,” referring to the 2022 Inflation Reduction Act.
“I expect this will do little to advance Americans affordably accessing needed medicines,” Conti said of the executive order.
How much could the order lower drug prices?
Trump claimed a variety of percentages by which the executive order would lower drug prices.
In a Truth Social post the morning of his announcement, Trump said, “DRUG PRICES TO BE CUT BY 59%, PLUS!” During the press conference, Trump repeated that figure, giving a range of 59% to 80%, but also going as high as 90% — and at one point said it would be even “more than that.”
It is unclear how Trump derived his exact numbers. But if the administration were to successfully reduce prices for U.S. drugs to the lowest price paid in other developed countries, some reductions could be in the range Trump stated.
For instance, the Peterson-KFF analysis of Medicare prices for 10 brand-name drugs showed that the negotiated prices were still higher than the average price in comparable countries. Medicare prices would be reduced by 53% to 86% if it instead paid the lowest price in these comparable countries.
Similarly, Mulcahy said that using the estimates in his analysis, “you would expect to save about two-thirds” if the U.S. were able to bring drug prices down to match the average price in other OECD countries.
However, it is unknown whether these savings will materialize for Americans.
“The devil’s in the details in terms of how they would actually bring prices down to these lower levels,” Mulcahy said. “All of these important policy development and implementation questions would determine the actual magnitude of savings, and none of that detail is in the executive order.”
Cubanski also said that the savings achieved by the executive order depend on “whether it can actually withstand legal challenges that might be filed by the pharmaceutical industry.” The prior Trump administration attempted to impose a “most favored nation” plan on certain drugs under Medicare, Cubanski said, but courts blocked the rule on procedural grounds and the Biden administration eventually rescinded it.
And even if the administration were to successfully reduce some drug costs to the amount paid abroad, it’s uncertain how much individual Americans, who access drugs via health insurance, Medicare or some other payer, would save.
There are also potential practical challenges associated with tying drug prices to those in foreign countries.
A 2024 CBO report estimated that if a plan connecting drug prices in the U.S. to those in other countries were implemented, “manufacturers would respond in ways that would reduce access to and availability of those drugs for patients in those foreign countries to mitigate the effect on prices in the United States,” including delaying the launches of drugs in foreign countries or withdrawing them altogether from some countries.
CBO and other experts also have suggested that drug companies could provide different versions of drugs in other countries to try to get around comparisons, or provide rebates or otherwise try to reduce transparency into drug pricing.
“All this talk will do is reduce Americans’ visibility into the prices paid for these medicines overseas,” said Conti, the health economist from Boston University.
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