Trump orders drug price reform, states can import affordable drugs

On Tuesday, President Trump signed an executive order aimed at lowering prescription drug prices for American patients. The order includes expanding drug imports, improving drug pricing negotiation systems, adjusting insurance payment rules, and conducting a comprehensive review of the current drug pricing mechanism.

For years, drug prices in the United States have remained high, making it one of the countries with the highest prescription drug prices globally. Even with medical insurance, many people still have to bear significant drug costs out of pocket. According to a study commissioned by the Department of Health and Human Services (HHS) from RAND Health Care, in 2022, the cost expenditure on brand-name drugs in the United States was about 3.2 times higher than in other developed countries, based on the latest available data.

White House officials stated that this executive order will provide substantial assistance to elderly and low-income groups who rely on drugs like insulin, and help establish a more competitive prescription drug market to better reflect the actual value of drugs.

The executive order directs the Food and Drug Administration (FDA) to simplify the import process, allowing states to directly import drugs from countries with lower prices while ensuring safety and quality standards.

Currently, only Florida has been authorized to import drugs from Canada, with other states yet to implement similar policies.

The executive order also proposes adjustments to the drug price negotiation mechanism under the Insulin Reduction Act (IRA). As per current regulations, Medicare can negotiate prices for oral drugs after 9 years of market entry, while injectables require 13 years, a disparity that has drawn criticism.

Some argue that such differences may lead to investments in high-priced, biologic drugs targeting rare diseases, while overlooking cheaper, small-molecule prescription drugs that cater to a broader range of patients.

The executive order mandates the Health and Human Services Secretary to propose an “maximum fair price” (MFP) policy for 2026-2028 within 60 days, enhancing transparency in drug price negotiations, prioritizing negotiations for drugs with high Medicare expenditures, and suggesting consistent standards for negotiating small-molecule drugs and biologics to avoid systemic inequalities.

The executive order also highlights key measures for populations facing significant drug price pressures.

High-priced drug payment pilot program:

Within a year, the Department of Health is required to design and implement a new payment model to strengthen Medicare’s negotiation ability on high-priced drugs and biologics.

Investigation of drug actual costs:

It mandates an investigation of the actual costs hospitals and outpatient clinics incur in purchasing drugs, with adjustments to Medicare payment standards as necessary to align with market prices.

Optimizing Medicaid drug payment and rebate system:

The executive order instructs recommendations for reform within 180 days, enhancing accuracy in rebate amounts and exploring linking drug payments to actual efficacy or value to assist states in managing healthcare expenditures more effectively. In the Medicaid system, “rebate” refers to pharmaceutical companies returning a portion of their sales revenue to the government according to federal law to reduce the actual cost of drugs and public expense.

Adjusting 340B prescription drug program subsidy conditions:

It requires subsidized health centers to provide affordable insulin and injectable adrenaline to specific groups, including high-cost patients, the uninsured, and those who have not met insurance deductibles.

To improve drug distribution efficiency and encourage innovation, the executive order includes several market reform measures.

Reviewing the role of intermediaries:

The President’s domestic policy advisory team is to collaborate with relevant agencies to propose optimizations within 90 days to enhance competitiveness and transparency in the drug supply chain.

Accelerating the approval of generic drugs and biosimilars:

The FDA has to propose improvements within 180 days to expedite the approval process for generic drugs and biosimilars, and streamline the process of transitioning prescription drugs to over-the-counter.

Preventing monopolistic behavior:

The Department of Health, along with the Department of Justice, the Department of Commerce, and the Federal Trade Commission, will hold joint hearings to suggest policies to prevent pharmaceutical companies from monopolizing and engaging in anti-competitive practices.

This order does not adopt the “Most Favored Nation” policy, requiring pharmaceutical companies to offer drugs to the U.S. market at the lowest global prices.

Officials emphasize that the focus of this executive order is to enhance negotiation mechanisms and market structures to achieve the goal of rationalizing drug prices.

Furthermore, the Trump administration initiated a national security review on Monday to evaluate whether to impose tariffs on imported drugs, a move that could increase trade tensions with other countries. However, U.S. officials stated that there is still room for drug prices to decrease.

An official told the Financial Times, “We can pursue two goals simultaneously: first, to make government payments and intellectual property rights system more reasonable, so drug prices reflect their true value; second, to establish a resilient supply chain to address risks from geopolitics or natural disasters.”