President Trump’s new Executive Order pits the drug industry against the government in a fierce battle over pricing and innovation risk.
At a Glance
- President Trump issued an Executive Order on May 12, 2025, demanding drugmakers lower prices within 30 days or face binding “most-favored nation” regulations.
- The order targets Pharmacy Benefit Managers (PBMs) like CVS and Cigna, whose stocks dropped notably upon the announcement.
- Trump plans to tie U.S. drug costs to the lowest prices in other wealthy nations, potentially slashing prices by 59–90 percent.
- Industry lobby PhRMA warns such cuts threaten investment and innovation, referencing plans to spend hundreds of billions in the U.S.
- Major pharmaceutical stocks—including AstraZeneca, GSK, Roche—experienced volatility as markets reacted to the policy.
Policy Implications and Mechanisms
Trump’s Executive Order, signed on May 12, 2025, directs Secretary Robert F. Kennedy Jr. to negotiate price reductions with drug companies. If voluntary cuts fail, the U.S. may adopt a most-favored nation pricing model—linking domestic drug payments to the lowest prices in comparable countries.
This could extend beyond Medicare and Medicaid into private insurance programs, amplifying its reach. Details remain murky, but the order also includes exploring drug importation and stricter enforcement by the Federal Trade Commission targeting anti-competitive industry behaviors.
Watch a report: Trump’s Drug Pricing Order Threatens Investment, Says Roche CEO.
Industry Response and Market Repercussions
PhRMA quickly condemned the order, describing it as a “bad deal” that could undermine treatment development. Roche’s CEO warned that aligning U.S. prices with international benchmarks could curtail a planned $50 billion investment in domestic R&D.
Market reactions were swift: stocks of Cigna fell nearly 6 percent, CVS dropped about 3 percent, and European giants AstraZeneca and GSK saw volatility, reflecting concern over lost U.S. revenue.
Challenges Ahead and Future Outlook
Despite the assertive tone, the policy faces significant hurdles. Similar pricing reforms were blocked in courts and faced strong legal resistance. Experts caution that concrete savings may take years to materialize due to administrative delays, and private insurers may only see minimal cost relief.
Meanwhile, critics fear that undermining pharmaceutical profits may slow innovation in biotech and medicine, even as U.S. drug prices remain nearly three times higher than in peer nations.
The clash between Trump’s aggressive pricing overhaul and Big Pharma’s defense of innovation sets up a long-term showdown affecting patients, investors, and the global pharmaceutical landscape.
