Trump Signs Most-Favored-Nation Executive Order - Potential Impact on Drug Supply Chain

After significant fanfare and anticipation, President Trump issued his “Delivering Most-Favored Nation Prescription Drug Pricing to American Patients” Executive Order (Executive Order) this week. The Executive Order seeks to reduce the price of drugs by requiring manufacturers to offer the United States most-favored-nation pricing, or in other words, the lowest price offered to any “comparably developed” foreign country that pays for the same drugs.

It is worth noting that this is President Trump’s second “Most-Favored Nation” Executive Order. 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 rulemaking to test a payment model under which Medicare would pay no more than a most-favored-nation price for drugs covered by Medicare Part B and Part D. PhRMA challenged this First Term Executive Order and subsequent CMS rulemaking, resulting in an injunction and recission of the rulemaking by the Biden administration.

This post will provide an overview of the requirements of the Executive Order, discuss its potential impacts on various entities within the pharmaceutical supply chain, and outline some of the open questions and legal issues raised by the Executive Order.

Overview of the Executive Order

The Executive Order authorizes the Secretary of the Department of Health and Human Services (HHS), 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 should manufacturers fail to make significant progress towards meeting the most-favored-nation pricing requirements. In addition, the Executive Order requires the HHS Secretary to facilitate a process whereby manufacturers can sell drugs directly to patients at most-favored-nation pricing.

Within thirty days following the Executive Order’s execution, HHS will communicate most-favored nation pricing targets to manufacturers, and thus start the clock on assessing manufacturers’ progress in lowering the cost of drugs to the lowest price paid by comparable countries.

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 consider the following actions:

• Issue rulemaking to impose most-favored-nation pricing.
• 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.
• 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, as required under Section 13 of President Trump’s Executive Order 14273 of April 15, 2025.

The Executive Order also requires the Secretary of Commerce and the United States Trade Representative to take all “necessary and appropriate” action to ensure comparable countries are not driving drug costs below fair market value, thereby “forcing American patients to pay for a disproportionate amount of global pharmaceutical research and development.”

Potential Impact of the Executive Order

The Trump administration’s intended outcome of the Executive Order is to lower drug prices in the United States, and, if implemented, this Executive Order would likely have various ripple effects throughout the pharmaceutical supply chain.

Manufacturers argue the Executive Order is misguided and will lead to strained resources and stifled innovation, hindering manufacturers’ ability to carry out the research and development necessary to advance breakthrough treatments and cures. Manufacturers also argue that the Trump administration must regulate other parties within the complicated pharmaceutical supply chain.

The Executive Order may indirectly impact pharmacy benefit managers (PBMs) as manufacturers struggle with smaller margins. If the most-favored-nation requirements are implemented, manufacturers likely will need to offset the impact of the reduced price of drugs and may reduce or eliminate rebates on certain drugs or certain therapeutic categories.

Open Questions and Legal Issues

The Executive Order leaves open many questions in terms of actual implementation of the most-favored-nation requirements. Compared to the First Term Executive Order, which clearly applied most-favored-nation requirements to Medicare Part B and Part D, 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.

Another critical question is whether the Trump administration has the authority to impose most-favored-nation pricing requirements on all drugs without Congressional action. The First Term Executive Order required implementation of the most-favored-nation requirements through the Centers for Medicare & Medicaid Innovation’s (CMMI) waiver authority. This waiver authority allows CMMI to waive any requirement of the Social Security Act that could impede a demonstration project. Given that the previous Trump administration believed CMMI’s waiver authority was required to implement the most-favored-nation requirements, it raises questions as to the current administration’s ability to implement such requirements without Congressional action (or CMMI authority).

Aside from these foundational questions, there are several operational questions not addressed by the Executive Order. These include:

1. How will the Trump administration define “comparably developed” nations?
2. What does it mean to make “significant progress towards [delivering] most-favored-nation pricing” targets?
3. How will the Trump administration penalize non-compliant manufacturers?
4. How will the direct-to-consumer sales component work? What impact would this have on Part D plans?

The answer to some of these questions may introduce further legal issues and attendant challenges to the Executive Order.

Conclusion

While the pharmaceutical industry clearly opposes the Executive Order, the industry is relieved because the Executive Order provides manufacturers the benefit of time and uncertainty. We expect manufacturers will use this time and uncertainty to challenge the Executive Order and/or attempt to limit its scope. Mintz will be watching closely for any developments related to most-favored-nation pricing and will continue to provide updates.

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