Panic: Trump’s Attempts to Reduce Drug Prices Will Impact the Rest of the World

It has been a tumultuous four months since Donald Trump assumed power for the second time as the 47th President of the United States.

In our previous article on this subject, we discussed the potential impact of changes in economic policy, increases in tariffs, possible tax cuts, changes in the attitudes of regulatory agencies in the pharmaceutical industry, evolving perspectives in areas such as data protection, competition law and anti-corruption, and revisions in sanctions policy on the pharmaceutical industry.

In early May, a development that directly affected the pharmaceutical industry came to happen. This development will change both the American and global markets.

In our previous article, we noted that the Trump administration complained that “consumers should have access to treatments at lower prices" and that "new regulations on drug pricing would not be surprising". On May 12, 2025, Donald Trump's executive order was an important step in this direction.

Reasons we are accustomed to

The executive order was justified by the fact that, despite accounting for only five percent of the world's population, the US generates three-quarters of the global pharmaceutical industry's profits, that drug manufacturers offer extensive discounts to access foreign markets, and that they subsidize these discounts through “enormously high prices” in the US.

It was stated that the US government has turned its back on its citizens by failing to address this issue, that American citizens are unwittingly sponsor drug manufacturers and other countries, that these companies are imposing high profit margins on American consumers, and that they are benefiting from R&D incentives and extensive public funding at the federal and state levels.

It was claimed that instead of eliminating price discrimination, drug companies accept lower price demands in other countries, while simultaneously preventing public and private payers (government agencies, insurance companies, etc.) that finance healthcare in the US from negotiating prices in favour of patients, and that the “inflated” prices in the US, and that foreign healthcare systems were “freeloading.”

It was emphasized that Americans cannot be forced to pay three times the price for products manufactured in the same factories, and that as the largest purchaser of pharmaceutical products, Americans should get the best deal.

These arguments have, of course, been voiced for a long time by both politicians and pricing experts in the pharmaceutical industry. In the US market, many products are sold at prices much higher than those in Europe or other regions, including Turkey, and the main reasons behind this are seen as the policies of both pharmaceutical companies and governments. Democratic presidents Obama and Biden had also taken initiatives such as launching negotiations to lower drug prices through Medicare and Medicaid programs or the Inflation Reduction Act to enable patients to benefit from better insurance conditions. Therefore, despite being sensational and controversial in many ways, it must be acknowledged that there is some validity to the logic behind the Executive Order.

Love it or leave it

On the other hand, the new policies established on this justification will be highly controversial. First, it is important to remember that similar regulations were planned during Trump's first term but were never implemented or were blocked by the courts.

Now, with the new executive order, it was stated that Americans must reach pharmaceutical products with “most favored nation” prices, and that the Trump administration will take immediate steps to stop “global freeloading” and that the government will take aggressive additional action if drug companies fail to offer American consumers most-favored-nation prices.

In this context, President Trump instructed United States Secretary of Health and Human Services Robert F. Kennedy Jr. in the executive order to facilitate direct-to-consumer purchasing programs that would ensure drug manufacturers sell their products at most-favored-nation prices. Kennedy Jr. himself is a controversial political figure known for his opposition to vaccines. Kennedy Jr. will, within 30 days of the date of the Executive Order, in coordination with Medicare, Medicaid, and other executive departments, communicate most-favored-nation price targets to pharmaceutical manufacturers.

If sufficient progress is not made after these target prices are communicated to drug companies, Secretary Kennedy will propose a new rulemaking plan to impose lower prices, design additional measures for drug imports, and even initiate enforcement action (such as potential antitrust investigations) in conjunction with the Federal Trade Commission (FTC) based on the findings of a report on anti-competitive behavior by drug manufacturers (to be prepared under the April 15 executive order).

Meanwhile, the Secretary of Commerce will launch an investigation into drug exports and take the necessary actions. Secretary Howard Lutnick is known for his good relations with Trump and as a key supporter of raising customs tariffs. At the same time, the Food and Drug Administration (FDA) will take the necessary steps to revoke or modify approvals for drugs that are unsafe, ineffective, or improperly marketed.

The executive order also instructs Secretary of Commerce Lutnick and US Trade Representative Jamieson Greer to initiate necessary actions against countries that cause American patients to pay excessive amounts, such as by suppressing drug prices below fair market value. In this context, countries where prices are lower than global standards may be targeted.

Legality of the Proposed Model

Trump had considered similar policies during his first term.

In 2018, it was announced that price negotiations and contracts would be made with drug companies for certain products covered by Medicare using an “international pricing index,” that these companies would supply drugs to healthcare providers and claim reimbursement from Medicare, and that Medicare would reimburse based on the average drug price in 14 “economically similar countries.” The implementation of this “reference pricing” system was targeted for 2020 but was put on hold due to concerns about its compatibility with U.S. law and its potential outcomes.

Trump had announced in July 2020 that, instead of the 2018 model, “most-favored country” prices would be applied, and then suspended this decision pending consultations with industry stakeholders. After those consultations did not take place, he reinstated the decision. This policy became the subject of the legal proceedings described below and was ultimately reversed by the Biden administration. The previous policy stipulated that the most-favored-nation prices would be the lowest prices applied in OECD member countries, effectively establishing a reference price system.

The lawsuit filed by the Biotechnology Innovation Organization, Biocom California, and the California Life Sciences Association against agencies such as the Centers for Medicare and Medicaid Services had blocked the Trump administration's previous attempt. In the lawsuit, the court found that the defendant agency had failed to follow the required notice and comment processes when implementing the relevant rules, and that the Trump administration had sought to avoid wasting time by implementing the necessary administrative procedures in its final days in office. The court therefore suspended the implementation of the relevant executive order with a preliminary injunction. One of the plaintiffs' arguments in this case was that there were significant differences between the pricing policy proposed by the Trump administration in 2018 and the policy proposed in 2020.

Similarly, in the Association of Community Cancer Centers' lawsuit against the Department of Health and Human Services, the Maryland District Court granted a temporary restraining order, suspending the implementation of the Department's decision on the grounds that even though the court was “not unsympathetic to the desire to test a new model to rein in Medicare Part B drug costs,” the Department's decision on most-favored-nation prices did not fulfil the necessary administrative procedures.

It is impossible to predict exactly what the Trump administration's final policy will be and how it will be implemented through administrative procedures and legal regulations. The legislative branch may not be receptive to new policies. As with the increase in customs duties, it should not be overlooked that Trump administration policy announcements sometimes mark the beginning of a long negotiation process, while others are intended as a warning. On top of that, when we add that there is no final court ruling on the constitutionality and legality of the previous administration's initiatives, the uncertainty increases.

Nevertheless, as we mentioned in our previous article, drug pricing reform is a serious issue that is desired by both sides of the American political spectrum. The profitability of pharmaceutical companies has been a topic of debate for many years. For example, while American pharmaceutical companies explain their high profitability with R&D expenses, they have been criticized for allocating a significant portion of their budgets to spending such as share buybacks, and even during the pandemic, calls for pharmaceutical companies to waive their patent rights have been raised.

Research shows that drug pricing reform also has support among the American public. 63% of American consumers believe that drugs developed over the past 20 years have had a positive impact on their lives, and 54% of the public is aware of the impact of R&D costs on prices. However, a significant majority of 82% believe that drug prices are at unreasonable levels, and 83% believe that pharmaceutical companies' profits are a major factor in pricing. Therefore, prices will eventually be reviewed, if not immediately. Pharmaceutical companies are an easy target for American politicians.

Potential Impact and Criticisms

The application of most-favored-nation prices in the US market, i.e., the application of the cheapest price in another country, could be problematic in many respects.

First, restrictions or bans on the import of certain products into the US or their export from the US would, above all, cause unforeseeable patient harm and public health issues. The inability to access products at sufficiently low prices in the US market would hinder patients' access to healthcare in the US; moreover, restrictions on the export of drugs produced in the US would require alternative treatments for patients in other countries. Pharmaceutical products are critical to public health; therefore, their pricing should be regulated primarily with an eye to ensure patients' access to treatment.

Second, determining the most-favored-nation prices for the implementation of the Trump administration's desired policy may be complicated. Drug pricing is regulated in different ways in many countries and sometimes involves complex models that include detailed government discounts or reimbursement conditions. In this context, drug companies and public institutions in countries outside the US may manipulate prices through non-public, confidential discounts (alternative reimbursement agreements with confidentiality obligations). The Trump administration may seek to compel drug companies to disclose the prices and discounts they apply in other countries, but this could provoke reactions from both the industry and other governments.

Third, companies that do not want to lose their profits in the US market may decide to exit markets where they had offered lower prices. In this case, prices in the US market would not fall, patients in foreign countries would be prevented access to drugs, and companies would suffer serious revenue losses. These revenue losses may also prevent the development of new treatments. Thus, instead of a win-win situation, a lose-lose-lose model could emerge.

Pharmaceutical companies were already on edge due to potential increases in customs duties. The uncertainty created by the decree will now complicate new investments from a different angle. The pharma sector is one where predictability is critical due to the many years required for R&D activities, establishment of production facilities, or obtaining drug approvals.

Considering that populations are aging in many countries around the world, it is clear that health policies must evolve and be provided under more suitable conditions to ensure public health. Accepting price disparities between countries is also not easy for societies. Yet, so much uncertainty in such a short time is concerning from many angles.