Trump Administration Revives Most-Favored-Nation Drug Pricing: Here's What To Know

Highlights

• President Donald Trump on May 12, 2025, issued an executive order, "Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients," which represents his administration's latest steps in ongoing efforts to lower prescription drug prices.
• Effects of a Most-Favored-Nation pricing model will vary based on countries selected, drugs included and the formula used to calculate the U.S. price.
• This Holland & Knight alert examines various factors to consider in the administration's efforts to lower prescription drug prices.

President Donald Trump on May 12, 2025, issued an executive order (EO) titled "Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients" and an accompanying Fact Sheet, "President Donald J. Trump Announces Actions to Put American Patients First by Lowering Drug Prices and Stopping Foreign Free-riding on American Pharmaceutical Innovation." The EO represents the latest step in the Trump Administration's ongoing efforts to lower prescription drug prices. The impact of a Most-Favored-Nation (MFN) pricing model will vary based on which countries are selected, which drugs are included and the formula used to calculate the U.S. price.

This is, in many ways, a reprise of earlier initiatives. During his first term, President Trump issued a similar EO that led to a November 2020 interim final rule advancing an MFN reference pricing model for Medicare Part B that aimed to lower drug prices by tying them to the lowest prices paid by comparable countries, specifically Organization for Economic Co-operation and Development (OECD) countries with at least 60 percent of the U.S. per capita gross domestic product (GDP). This model focused on the top 50 highest-spending drugs in Medicare Part B. The model considered drug prices in 22 comparable OECD countries, excluding those with low sales volumes (less than $1,000 or 1,000 units in a quarter). However, that rule was blocked by three separate federal courts due to the lack of notice-and-comment rulemaking and was ultimately rescinded by the Biden Administration in December 2021.

The concept of MFN pricing later reemerged as a legislative proposal during development of the Inflation Reduction Act's (IRA) drug price negotiation framework. Though early drafts considered international reference pricing, the final law relied on a different benchmark – non-Federal Average Manufacturer Price (non-FAMP) data reported to the U.S. Department of Veterans Affairs by manufacturers and reflects the average price wholesalers pay manufacturers for a brand drug distributed to nonfederal purchasers. The non-FAMP does not reflect the rebates a manufacturer pays to health plans and pharmacy benefit managers.

The May 12, 2025, EO departs from its predecessor by omitting explicit references to Medicare or Medicaid, although the accompanying fact sheet suggests these programs are within scope. Instead, the EO outlines three near-term directives:

1. The U.S. Department of Health and Human Services (HHS) shall consider facilitating direct-to-consumer purchasing programs for pharmaceutical manufacturers to sell their products to American patients at the MFN price. Direct-to-patient distribution marks a notable shift in the marketplace. Anticipate the development of a framework that allows manufacturers using the MFN price to offer greater access for direct-to-consumer drug purchasing.
2. Within 30 days, HHS will communicate MFN price targets to manufacturers to align U.S. prices with those in "comparably developed nations."
3. If significant progress toward MFN pricing is not achieved, HHS must propose a regulation to impose MFN pricing.

Additional Steps

If sufficient progress toward MFN pricing is not achieved, the EO further directs federal agencies to take additional steps:

• The HHS Secretary shall propose a rulemaking to implement MFN pricing.
• The HHS Secretary shall consider certification to the Congress that importation under Section 804(j) of the Federal Food, Drug, and Cosmetic Act (FDCA) will pose no additional risk to the public's health and safety and result in a significant reduction in the cost of prescription drugs to the American consumer and, if the secretary so certifies, then the U.S. Food and Drug Administration (FDA) Commissioner shall take action under Section 804(j)(2)(B) of the FDCA to describe circumstances under which waivers will be consistently granted to import prescription drugs on a case-by-case basis from developed nations with low-cost prescription drugs.
• The U.S. Attorney General and Federal Trade Commission Chair shall consider enforcement actions against anti-competitive practices by manufacturers, based on findings identified in the report issued under President Trump's April 15 EO.
• The U.S. Department of Commerce Secretary and other agency heads must review and consider actions related to the export of drugs or precursor materials that may contribute to global price disparities.
• The FDA Commissioner must review and, if necessary, modify or revoke drug approvals for products deemed unsafe, ineffective or improperly marketed.
• The Assistant to the President for Domestic Policy, along with relevant agencies, must take all available action to address "price discrimination."

Significantly, if "substantial progress" is not achieved, the EO also contemplates permitting broader personal importation of lower-cost drugs from foreign countries. Though Section 804(b)-(h) of the FDC Act and FDA regulations at 21 C.F.R. Part 251 already allow states and certain entities to establish Section 804 Importation Programs (SIPs) to import drugs from Canada, only Florida has received FDA authorization to date.

The EO raises several unanswered questions, including, but not limited to:

• How will HHS determine MFN price targets and for how many drugs?
• What constitutes "significant progress" sufficient to avoid regulatory enforcement?
• Which types of drugs will be included?
• Will the MFN pricing or direct-to-consumer programs apply only to Medicare and Medicaid beneficiaries?
• How broad will the program be in terms of drug inclusion – limited to the highest-cost therapies or extended to a larger formulary?
• Does MFN take into account the underwriting of drug costs by foreign governments?

Conclusion

Perhaps the most critical questions are whether HHS has the authority to consider internal drug pricing under the IRA, whether the Center for Medicare and Medicaid Innovation can advance MFN pricing for all or certain drugs and whether these efforts will ultimately face legal challenges under the Commerce Clause.

Given the ambitious scope and the many unresolved questions, further policy actions from the Trump Administration are likely. Additional regulatory or trade measures may also be pursued by the Commerce Department or U.S. Trade Representative to reinforce the administration's stance against global price disparities.

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