On Dec. 12 (local time), U.S. President Donald Trump signed an executive order aimed at reducing prescription drug prices in the United States to levels comparable with other countries. Before signing, Trump described this executive order as “the most significant executive order in history.” The order has garnered attention for potentially reducing notoriously high U.S. drug prices by up to 90% and for directly confronting the pharmaceutical cartel, but many are skeptical about its feasibility.
The executive order focuses on “normalizing” U.S. drug prices to align with those of other advanced countries. Trump stated that the U.S. will pay the lowest price among the prices that other advanced countries pay and referred to it as the “Most Favored Nation (MFN)” price. He said, “The United States accounts for only 4% of the world’s population, but pharmaceutical companies generate more than two-thirds of their profits in the U.S.,” adding, “As of today, the U.S. will not subsidize healthcare services for other countries.”
◇Reasons for high U.S. drug prices
The U.S. has some of the highest prescription drug prices in the world. U.S. drug prices are on average three times higher than those in other advanced countries. For instance, the U.S. list price for the diabetes medication Jardiance was $611 for a 30-day supply last year, which is about nine times the approximately $70 price in Switzerland. Compared to Japan’s $35, there is a price difference of 17 times. The anticoagulant Eliquis is currently sold in the U.S. for $606 for a 60-count pack, while it is about $20 in Japan.
The complexity of the healthcare system is a reason for high drug prices in the U.S. The U.S. healthcare system consists of three public insurance categories: private insurance, employer-based health insurance, Medicare (health insurance for those over 65), and Medicaid (health coverage for the poorest). The BBC reported, “Other advanced countries have centralized healthcare systems allowing governments to negotiate drug prices uniformly or reject purchases if prices are deemed excessively high.” In contrast, the fragmentation of the U.S. healthcare system makes negotiating drug prices difficult.
However, there have been efforts by the U.S. government to reduce drug prices in the past. According to Reuters, Trump criticized the pharmaceutical industry in his first term in 2017, stating that “(the pharmaceutical industry) commits murder and faces no punishment,” and attempted to lower drug prices. The Biden administration also permitted negotiation of prices for the most expensive drugs within Medicare through the “Inflation Reduction Act (IRA).” The prices of 10 prescription drugs that were up for negotiation at that time were up to five times higher than those in other advanced countries.
However, efforts to lower drug prices have been obstructed by the lobbying of large pharmaceutical companies. The price reduction attempt during Trump’s first term was derailed due to backlash from the pharmaceutical industry and procedural objections in court, while the Biden administration’s IRA is expected to take partial effect from 2026 but remains relatively high compared to other countries. According to NBC News, Trump stated upon signing this executive order, “I am doing this for the American people,” adding, “I am standing up to the most powerful lobby, the pharmaceutical lobby.”
◇Industry backlash and legal challenges ahead
Major foreign media evaluations of this executive order are negative. The executive order requires pharmaceutical companies to reduce prices within 180 days, and if they fail to do so, U.S. Secretary of Health and Human Services Robert F. Kennedy Jr. is directed to work with pharmaceutical companies for 30 days to explore drug price reduction strategies. The Wall Street Journal (WSJ) reported that “this order does not specify whether price fluctuations apply to Medicare or Medicaid,” indicating that its impact is widespread and could also apply to private insurance.
It is also challenging to compare prices to lower U.S. drug prices to those of other countries. Reuters noted, “Experts warn that referencing prices from other countries is complicated,” stating that “many drugs sold in the U.S. are not available overseas, and some countries do not disclose drug prices or take years to negotiate prices.” Anna Kaltenbach, a health economist who participated in Biden’s IRA, remarked that “the pharmaceutical industry is likely to reflect profit reductions in the U.S. in the drug prices of other countries or delay product releases while considering the impact of other countries' drug prices on the U.S.”
The backlash from the pharmaceutical industry is also intense. Alex Schreiber, executive vice president of the Pharmaceutical Research and Manufacturers of America (PhRMA), stated, “Any form of government price setting is bad for American patients,” adding that “at a time when competition with China is intensifying, policymakers should focus on fixing the flaws of the U.S. system rather than introducing failed policies from abroad.” John Crowley, representing BIO, a leading trade association for U.S. biotechnology companies, called the proposal of “Most Favored Nation” a very dangerous proposal that could destroy small and medium-sized biotechnology companies in our country.
Major foreign media outlets predict that this executive order will also likely face legal challenges. Reuters quoted health policy lawyer Paul Kim, indicating that “this executive order is likely to face legal challenges,” stating that the price limit included in this order exceeds the range allowed by law. Bernie Sanders, a Democratic senator who previously campaigned on reducing drug prices during the Democratic primary, remarked, “As Trump knows well, his executive order will be dismissed in court.”