Trump Revives “Most Favored Nation” Drug Pricing Policy



On May 12, 2025, former President Donald Trump signed a major executive order aimed at slashing U.S. prescription drug prices by tying them to the lowest prices paid in other wealthy countries-a policy known as the “most favored nation” (MFN) approach.

Key Details of the Policy:

• The executive order directs the Department of Health and Human Services (HHS) to set new price targets for a wide range of prescription drugs, including those covered by Medicare, Medicaid, and private insurance. The goal is for Americans to pay no more than the lowest price paid for the same drugs in comparable developed nations.
• Trump claims the policy could cut drug prices by 30% to 80%, and has publicly promised a 59% reduction in costs.
• The initiative is broader than previous efforts, with no drug or class off limits. However, the administration will prioritize drugs with the highest costs and largest price disparities-potentially including popular weight-loss and diabetes medications like GLP-1 drugs.
• If drugmakers do not voluntarily meet the new price targets within 30 days, HHS Secretary Robert F. Kennedy Jr. is authorized to impose MFN pricing through new regulations.
• The policy also instructs U.S. trade officials to challenge what Trump calls “discriminatory” foreign pricing practices that keep drug costs lower abroad at the expense of American consumers.

Industry and Market Impact:

• The announcement caused immediate declines in pharmaceutical company stocks, with major firms like Eli Lilly, Pfizer, Merck, and Johnson & Johnson seeing share prices fall.
• The pharmaceutical industry is expected to challenge the order in court, as a similar MFN policy introduced during Trump’s first term was previously blocked by a federal judge for not following proper rulemaking procedures.

What It Means for Consumers:

• The U.S. pays some of the highest prescription drug prices in the world-often nearly three times more than other developed nations.
• If implemented, the MFN policy could significantly lower out-of-pocket costs for many Americans, but the timeline and full impact remain uncertain due to likely legal and regulatory hurdles.

Benefit Group’s Take:

While any opportunity to lower prescription drug costs for employers and consumers is a welcomed initiative, we reserve judgement until we learn more. With the details on exactly how this will be acheived are still being determined, we won’t understand its full impact until later this year.