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President Donald Trump announced on Sunday that he plans to revive controversial policies from the first semester aimed at reducing drug costs by basing payments for certain drugs based on prices in other countries.
His previous rules, dubbed “the most preferred country,” were finalized in late 2020, but were blocked by federal courts and retracted in 2021 by then-President Joe Biden. It was applied to Medicare payments for certain drugs administered at the doctor’s office. However, it is unclear what payments or drugs the new directive will apply.
In a true social post on Sunday night, Trump said Monday morning that he plans to sign an executive order.
“I sign one of the most consequential executive orders in our country’s history. Prescription drugs and pharmaceutical prices will drop by 30% to 80% almost immediately,” he writes. “I will enact the policies of the most preferred countries where the US pays the same price as the countries that pay the lowest prices in the world.”
The directive is because the Trump administration is trying to impose tariffs on drug imports that were exempt from such taxation enacted during his first term of office. Tariffs can exacerbate shortages of certain drugs, particularly generic drugs, and ultimately raise prices.
If the new executive order is comparable to the 2020 rules, both Medicare and its beneficiaries can see their savings. But it could also limit patients’ access to medication, experts said. It depends heavily on the structure of the policy.
At least one health policy analyst has threw cold water at Trump’s claim that his latest efforts will significantly reduce drug costs.
“Trump has a longer history with his first term of speaking bigger about drug pricing than his policies actually do,” Raymond James analyst Chris Meakkins wrote in a note to his client on Sunday evening. “The more enforcement actions Trump has proposed, the less likely it is to be implemented to make the court agenda successful.”
Lowering drug prices was a major topic in his first administration, but Trump hasn’t focused on the topic as much as the term. And his campaign told Politico last year that he had left the “most preferred country” model, which many Republicans strongly oppose.
However, the administration recently revived the idea as a potential way to meet Medicaid’s deep spending reduction targets with House GOP’s drastic tax and spending reduction package. However, it is unclear whether the proposal will be included in the law, whether details will need to be released soon, or if it will be subject to the executive order.
The initiative is likely to face harsh opposition from the pharmaceutical industry and successfully halted its first iteration.
“This foreign initial pricing scheme is a bad deal for American patients. Importing foreign prices cuts billions of dollars from Medicare without ensuring they help patients or improve access to medicines.” “It puts the hundreds of billions of billions of people our member companies plan to invest in America at risk and rely more on China for innovative medicines.”
The Trump administration introduced the idea of linking Medicare drug rebates to prices in other countries in 2018, and finalising the rules shortly after the 2020 election. The seven-year model allowed the US to piggyback with discounts negotiated by other fellow countries. This usually costs much less for drug therapy, as governments often determine costs.
Under the 2020 initiative, Medicare would have paid the lowest available price among these fellow countries for 50-part B drugs managed in the doctor’s office. The administration estimated it would save around $86 billion.
At the time, Medicare was banned from negotiating drug prices, but that changed with the passage of the Democratic Inflation Reduction Act in 2022.
The “most preferred country” proposal could save beneficiaries money with out-of-pocket costs and premiums, which are affected by drug prices, experts said.
This story has been updated with additional information.