Heads up: this issue is from May 22, 2025. Because it covers time-sensitive coding and regulatory topics, some details may have changed since. See the latest issues for current guidance.
President Trump issued his “Delivering Most-Favored Nation Prescription Drug Pricing to American Patients” Executive Order last week. The Executive Order aims to lower the price of branded drugs by requiring manufacturers to offer the United States most-favored-nation pricing, which is the lowest price offered to any comparably developed foreign country that purchases the same drugs. Let's all take a deep breath and remember that Executive Orders can be removed or changed with Congressional or judicial intervention.
Let's all recall that this is not President Trump’s first “Most-Favored Nation”("MFN") rodeo. During his first administration, he released the “Lowering Drug Prices by Putting America First” Executive Order (First Term Executive Order), which required CMS to issue rule-making to test this model under which Medicare would pay no more than a most-favored-nation price for drugs covered by Medicare. PhRMA challenged this First Term Executive Order. Two federal courts temporarily blocked implementation of this model: first, the United States District Court for the District of Maryland issued a temporary restraining order in Association of Community Cancer Centers ("ACCC") v. Azar, and, second, the United States District Court for the Northern District of California issued a preliminary injunction in California Life Sciences Association v. CMS. Then, there was dismissal and rescission of the rule-making by the Biden administration.
The first MFN (Medications Fail Needlessly) was to be administered by the Centers for Medicare and Medicaid Innovation ("CMMI"), and it is likely that if this gets off the ground, MFN 2.0 will be under CMMI too.
The following sections provide a brief overview of the Executive Order's requirements, discuss its potential impacts on various stakeholders within the pharmaceutical supply chain, and outline outstanding issues with this model. Again, it is expected that this will be challenged.
Overview of the Executive Order
The Executive Order authorizes the Secretary of the Department of Health and Human Services (HHS), Robert Kennedy, among other members of the current administration, to take immediate steps to ensure the United States receives most-favored-nation pricing for prescription drugs and to enforce the Executive Order. If manufacturers fail to make significant progress towards meeting the most-favored-nation pricing requirements, their products will be subject to MFN involuntarily.
The HHS Secretary shall, to the extent consistent with law, “facilitate direct-to-consumer purchasing programs” for products at the MFN price. Per the Fact Sheet, the HHS Secretary “will establish a mechanism through which American patients can buy their drugs directly from manufacturers” at an MFN price, “bypassing middlemen". I guess Cardinal, McKesson, and Cencora will have something to say about this.
Within thirty days following the execution (what an appropriate expression) of the Executive Order, HHS will communicate most-favored nation pricing targets to manufacturers, thereby initiating the assessment of manufacturers’ progress in lowering the cost of branded drugs to the lowest price paid by comparable countries. If “significant progress towards most-favored-nation pricing for American patients is not delivered,” the Secretary and other officials shall take the additional actions described in the remaining bullets below.
Should manufacturers fail to significantly move towards achieving the most-favored-nation pricing targets established by HHS, the HHS Secretary and heads of other agencies may (or may not) consider the following actions:
- Issue rulemaking to impose most-favored-nation pricing on those unwilling to lower their prices.
- Provide a certification to Congress that importation is a viable alternative to lower the costs of drugs in the United States and poses no additional risk to public health or safety. Upon such certification, the Commissioner of the Food and Drug Administration (FDA) would release criteria for the granting of drug importation waivers.
- Perform a study related to the exportation of drugs or drug materials that may aid in global price discrimination--whatever that means. How about R&D costs here compared to elsewhere?
- Modify or revoke certain drug approvals, including for reasons of a lack of safety or efficacy, and improper marketing.
- Any other actions to address global price discrimination against United States consumers.
Notably, the Executive Order gives manufacturers 180 days to negotiate with HHS before the Attorney General and the Chairman of the Federal Trade Commission (FTC) can bring enforcement actions against manufacturers for anti-competitive practices. Any such enforcement action will follow the release of the joint HHS, Department of Justice (DOJ), Department of Commerce (DOC), and FTC report recommending ways to reduce anti-competitive behavior from manufacturers.
Potential Results of the Executive Order
Obviously, the goal of this Order is to lower drug prices in the United States. If implemented, this Executive Order could affect the pharmaceutical supply chain, and probably not favorably.
The Executive Order may indirectly impact pharmacy benefit managers (PBMs) as will some provisions in the Big Beautiful Budget Bill. This is allegedly intended to mitigate manufacturers' struggles with smaller margins. If the most-favored-nation requirements are implemented, manufacturers will likely need to offset the impact of reduced drug prices. They may reduce or eliminate rebates on specific drugs or therapeutic categories.
Issues, Questions, and Legal Issues
The Executive Order leaves many questions open regarding the implementation of the most-favored-nation requirements, which were a significant stumbling block last time. Compared to the First Term Executive Order, which clearly applied most-favored-nation requirements to Medicare Part B, this Executive Order does not articulate the scope of its requirements. For example, it is unclear whether the most-favored-nation requirements apply to drugs purchased only by government programs, including Medicare, Medicaid, and TRICARE, or if the requirements will apply to the purchase price of all drugs within the United States pharmaceutical supply chain. Also, some branded drugs are not approved in all countries or are not approved in any of them, like new drugs introduced in the U.S. What about access to them?
Here is the Fact Sheet outlining the Executive Order. It says a lot of nothing.
