President Donald Trump plans to sign an executive order aiming to slash U.S. prescription drug prices by up to 80% by benchmarking them against the lowest international prices, sending shockwaves through pharmaceutical markets worldwide.
Key Insights
- Trump announced plans to implement a “Most Favored Nation’s Policy” linking U.S. drug prices to the lowest international rates, potentially reducing costs by 30-80%.
- Billionaire investor Bill Ackman praised the plan, which aligns with his earlier suggestion to make it illegal for pharmaceutical companies to sell drugs cheaper abroad than in America.
- Pharmaceutical stocks globally tumbled following Trump’s announcement as markets reacted to the potential impact on industry profits.
- The policy aims to end what Trump calls an “embarrassing” situation where Americans subsidize drug development for the rest of the world through inflated prices.
- The executive order is scheduled to be signed on May 12, 2025, representing one of Trump’s most significant healthcare initiatives.
Trump’s Bold Move Against Pharmaceutical Pricing
President Donald Trump has announced plans to sign an executive order on May 12 that would dramatically reduce prescription drug prices in the United States. The policy would implement a “Most Favored Nation’s Policy” requiring drug companies to offer Americans the same prices they provide to other countries. This approach directly targets the long-standing issue where American consumers pay substantially more for medications than patients in other developed nations for identical products manufactured by the same companies.
The proposed executive order aims to reduce prescription drug prices by 30% to 80%, potentially saving American patients and the healthcare system trillions of dollars. Trump’s announcement focuses on correcting what he describes as an unfair system where Americans effectively subsidize lower drug prices for the rest of the world. This policy represents a significant shift in how the U.S. government would approach pharmaceutical pricing negotiations and regulation.
Billionaire Ackman’s Influence and Support
Bill Ackman, CEO of Pershing Square Capital Management, publicly endorsed Trump’s proposal, suggesting the president may have been influenced by Ackman’s own previously stated ideas. The billionaire investor has been vocal about the need to address how U.S. consumers subsidize global drug costs through higher domestic prices. Ackman specifically proposed making it illegal for pharmaceutical companies to sell their products at lower prices abroad than they do in the United States.
“The best way to reduce drug prices in the US is to make it illegal for drug companies to sell the same drugs abroad for lower prices than they sell them for here. This will force a globally negotiated price that will be lower than the prices that US consumers pay now and higher than what foreigners pay now. Otherwise we are stuck with a system where American consumers subsidize drug development for the rest of the world. Ask any pharma company CEO. They will agree that the above approach will have the intended effect.” stated Bill Ackman
Ackman praised Trump as the “first president in history to rectify the situation” regarding drug pricing disparities. He also tied the issue to broader economic concerns, criticizing various government subsidies for contributing to the national debt, which has reached approximately $37 trillion. His support lends significant credibility to Trump’s proposal from the investment community, despite the negative impact such policies might have on pharmaceutical stock values.
Market Reaction and Industry Impact
Financial markets reacted swiftly to Trump’s announcement, with pharmaceutical stocks experiencing significant declines globally. Major pharmaceutical indices in Europe, Asia, and India all registered drops as investors calculated the potential impact on industry profits. The SPDR S&P 500 ETF Trust and Invesco QQQ Trust showed slight declines in response to the news, though broader market futures remained relatively stable ahead of trading.
“For many years the World has wondered why Prescription Drugs and Pharmaceuticals in the United States of America were SO MUCH HIGHER IN PRICE THAN THEY WERE IN ANY OTHER NATION, SOMETIMES BEING FIVE TO TEN TIMES MORE EXPENSIVE THAN THE SAME DRUG, MANUFACTURED IN THE EXACT SAME LABORATORY OR PLANT, BY THE SAME COMPANY??? It was always difficult to explain and very embarrassing because, in fact, there was no correct or rightful answer” Donald Trump expressed.
The pharmaceutical industry has long defended its pricing structure by citing the high costs of research and development, regulatory compliance, and the need to fund future medical innovations. However, critics argue that the current system unfairly burdens American consumers who pay substantially more for the same medications than patients in other developed countries with more aggressive price negotiation policies. Trump’s proposed executive order would represent one of the most direct government interventions in pharmaceutical pricing in U.S. history.
Sources:
- Bill Ackman Slams Subsidies For Contributing To $37 Trillion National Debt, Hails Trump’s Drug Price Order
- Donald Trump to tether US drug costs to cheapest prices abroad: Bill Ackman says ‘must have liked my idea’
