The Impending Battle on the Hill: Trump Executive Order on Most-Favored-Nation Drug Pricing Appears To Have Teeth

“Starting today, the United States will no longer subsidize the healthcare of foreign countries” announced President Trump during a White House press conference on May 12, 2025. President Trump framed the issuance of Executive Order 14297, entitled “Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients,” in terms of trade and promised to reduce prescription drug prices in the United States by 59% to 90%. The need for pricing reform, according to President Trump, is obvious as Americans account for just over 4% of the world’s population but account for two-thirds of every dollar of profit earned by pharmaceutical companies. The end goal of most-favored-nation (MFN) pricing, also called international reference pricing, is to lower prescription drug costs in the United States by linking them to the lowest prices paid in other developed countries.

MFN Pricing for Drugs Has Long Been a Focus for President Trump

President Trump’s announcement and issuance of EO 14297 represents a continuation of a similar series of executive orders he issued in his first term. In Executive Order 13947, issued July 24, 2020, the President specifically directed the Secretary of Health and Human Services (HHS) to “immediately take appropriate steps to implement his rulemaking plan to test a payment model pursuant to which Medicare would pay, for certain high-cost prescription drugs and biological products covered by Medicare Part B, no more than the most-favored-nation price.” Two months later, President Trump issued Executive Order 13948 revoking EO 13957 in favor of issuing the same directive to HHS regarding Medicare Part B while also directing the Secretary of HHS to devise a rulemaking plan to create and implement a most-favored nations pricing plan for Medicare Part D prescription drugs. 

Despite Trump losing the 2020 election, HHS pushed forward and issued an interim final rule on November 27, 2020, proposing an MFN model to test “whether more closely aligning payment for Medicare Part B drugs and biologicals [] with international prices and removing incentives to use higher-cost drugs can control unsustainable growth in Medicare Part B spending without adversely affecting quality of care for beneficiaries.” By December 2020, it became clear the interim final rule would never take effect as one federal district court issued a nationwide injunction halting implementation of the rule (at least three other federal district courts issued similar, albeit more limited restrictions). Later in 2021, the Biden Administration sealed the proposed rule’s fate, resulting in HHS rescinding the rule on December 29, 2021.

President Trump has breathed new life into the idea of MFN pricing models for prescriptions drugs, but this time, his focus is not limited to Medicare Part B or Part D; instead, EO 14297 directs the Secretary of HHS to “facilitate direct-to-consumer purchasing program for pharmaceutical manufacturers that sell their products to American patients at the most-favored-nation price.” EO 14297 directs the Secretary of HHS, in concert with the Assistant to the President for Domestic Policy, CMS, and “other relevant executive department and agency officials” to communicate MFN price targets to pharmaceutical manufacturers within 30 days (by June 11, 2025). If after 30 days the stakeholders fail to make “significant progress” towards MFN pricing for all American patients, the Secretary of HHS is to propose MFN rulemaking.

To simplify, EO 14297 directs HHS and others to engage in rapid, direct negotiations with pharmaceutical companies to establish MFN pricing targets for all American consumers. Should negotiations not progress significantly or fail (the standard for “significant” is unclear at this juncture), HHS must propose a rulemaking plan, which presumably would be followed by notice and comment rulemaking.

Perhaps recognizing the pharmaceutical lobby’s prolific spending (~$387 million in 2024 alone and the leader of industry spending by more than $134 million), EO 14297 provides for several alternative actions should negotiations between the Administration and the pharmaceutical manufacturers fail to make “significant progress” in the next thirty days.

The Teeth in EO 14297

First, EO 14297 directs the Secretary of HHS to certify to Congress that importation of prescription drugs will pose no additional risk to public health and safety. Following certification, the Commissioner of the Food and Drug Administration (FDA) “shall” permit American consumers to import prescription drugs “from developed nations with low-cost prescription drugs.” If pharmaceutical manufacturers do not agree to MFN pricing voluntarily, HHS and FDA are directed to permit importation of prescription drugs from other countries at a much lower price.

Second, EO 14297 directs the Attorney General and the Chairman of the Federal Trade Commission to “undertake enforcement action against any anti-competitive practices” using the Sherman Antitrust Act and Section 5 of the Federal Trade Commission Act. The message to pharmaceutical manufacturers here is clear: make significant progress in negotiations or potentially face investigations by the DOJ and FTC.

Third, EO 14297 instructs the Secretary of Commerce and any other relevant agency to “review and consider all necessary action regarding the export of pharmaceutical drugs or precursor material that may be fueling the global price discrimination.” While EO 14297 does not compel any certain action, the message is simple: if negotiations fail, Commerce and other relevant agencies are to explore all options for ensuring that “business as usual” will not continue for pharmaceutical manufacturers.

Fourth, EO 14297 requires the FDA Commissioner to review and potentially modify or revoke approvals granted “for those drugs that maybe[sic] unsafe, ineffective or improperly marketed….” What it means to be “improperly marketed” or “ineffective” in this context remains to be seen, but most expect FDA to take an expansive view of these terms to include determinations about the cost versus the value of a particular drug.

Fifth, EO 14297 compels the “heads of agencies,” in coordination with the Assistant to the President for Domestic Policy, “to address global freeloading and price discrimination against American patients.” Again, it remains unclear as to which agencies this provision is directed or what actions qualify as “global freeloading and price discrimination.” This catch-all provision signals the Administration will explore all tools in its arsenal for securing changes to the status quo for drug pricing in the American market.

Finally, though not specifically articulated in EO 14297, is the profound impact the Trump Administration’s approach to prescription drug pricing, if implemented in earnest, would have on Pharmacy Benefits Managers (PBMs). PBMs are third-party companies that manage prescription drug benefits for health plans, individuals, employers, etc. PBMs also create formularies, process claims for prescription drug coverage and negotiate discounts and rebates on medications across the United States. 

At Monday’s press conference, President Trump was direct an clear that, “my Administration will cut out the middlemen… I don’t know who they are, but they’re rich, that I can tell you.” In the President’s view, PBMs “are worse than the drug companies. They don’t even make a product, and they make a fortune.” Following the press conference, share prices of CVS Health, UnitedHealth Group[1] and Cigna, all parent companies of the nation’s largest PBMs (CVS Caremark, Express Scripts, OptumRx), dropped as much as 6%. The Administration’s focus on cutting out PBMs comes on the heels of an FTC report issued in January 2025 suggesting CVS Caremark, Express Scripts, and OptumRx inflated drug prices by hundreds and thousands of percents, raising revenues to the companies by a combined $7.3 billion between 2017 and 2022.

What’s Next?

While it is unclear whether EO 14297 will meaningfully alter the landscape of prescription drug pricing, what is certain is that pharmaceutical manufacturers, industry groups, and PBMs will challenge any efforts at implementation of change in the courts. As noted above, the pharmaceutical industry is the highest spending lobby on Capitol Hill, and that will not change on account of EO 14297. EO 14297 casts a wide net and appears to anticipate that MFN pricing models will be challenged at every turn. Therefore, the “teeth” in EO 14297, including the threat of investigations by DOJ and FTC, potential tariffs/trade measures to curb “price discrimination” in the supply chain, and re-examination of FDA approved drugs for potential revocation of approval, may provide some deterrent effect to pharmaceutical manufacturers and may encourage “significant progress” in negotiations with the Administration.

So, set your reminders for June 11, 2025, to see if the Administration and the pharmaceutical industry have made “significant progress” towards MFN pricing. If not, time will be the judge of whether this Administration has the appetite to take on PBMs and high prescription drug prices.

Woods Rogers is closely monitoring these developments. Stay informed of the changes by signing up for Executive Order Updates. For further guidance, please contact the author of this alert, your Woods Rogers attorney, or any member of the Executive Order Monitor team.

_{[1] UnitedHealth Group’s share prices fell another 17% on Thursday, May 15, 2025, after the Wall Street Journal reported late on May 14, 2025, that DOJ had launched a criminal Medicare fraud investigation into UnitedHealth Group’s Medicare Advantage program. Over the last month, UnitedHealth Group’s share prices have dropped more than 50%, reaching a five-year low. See UnitedHealth Group is Under Criminal Investigation for Possible Medicare Fraud, May 14, 2025, available at https://www.wsj.com/us-news/unitedhealth-medicare-fraud-investigation-df80667f?mod=hp_lead_pos1.}