Trump Signs Executive Order To Demand Pharma Industry Cuts Prices

Economic

Summary:

U.S. President Donald Trump signed a wide-reaching executive order on Monday directing drugmakers to lower the prices of their medicines to align with what other countries pay that analysts and legal experts said would be difficult to implement.

The order gives drugmakers price targets in the next 30 days, and will take further action to lower prices if those companies do not make "significant progress" towards those goals within six months of the order being signed.

Trump told a press conference that the government would impose tariffs on companies if the prices in the U.S. did not match those in other countries and said he was seeking cuts of between 59% and 90%.

"Everybody should equalize. Everybody should pay the same price," Trump said.

Investors were skeptical about the order's implementation, and shares, which had been down overnight on the threat of "most favored nation" pricing, recovered and rose in early morning trade on Monday.

The United States pays the highest prices for prescription drugs, often nearly three times more than other developed nations. Trump tried in his first term to bring the United States in line with other countries but was blocked by the courts.

Trump's drug pricing proposal comes as the president has sought to fulfill a campaign promise of tackling inflation and lowering prices for a host of everyday items for Americans, from eggs to the gas pump.

Trump said his order on drug prices was partly a result of a conversation with an unnamed friend who told the president he got a weight loss injection for $88 in London and that the same injection in the U.S. cost $1,300.

If drugmakers do not meet the government’s expectations, it will use rulemaking to bring drug prices to international levels and consider a range of other measures, including importing medicines from other developed nations and implementing export restrictions, a copy of the order showed.

Trade groups representing biotech and pharmaceutical decried the move.

"Importing foreign prices from socialist countries would be a bad deal for American patients and workers. It would mean less treatments and cures and would jeopardize the hundreds of billions our member companies are planning to invest in America," PhRMA CEO Stephen Ubl said in a statement.

Ubl said the real reasons for high drug prices are "foreign countries not paying their fair share and middlemen driving up prices for U.S. patients."

The order also directs the U.S. Federal Trade Commission to consider aggressive enforcement against what the government calls anti-competitive practices by drugmakers.

"We're all familiar with some of the places where pharmaceutical companies push the limits to prevent competition that would lower their prices," one White House official said, pointing to patent protections and deals drugmakers make with generic companies to hold off on cheaper copies.

The executive order is likely to face legal challenges, particularly for exceeding limits set by U.S. law, including on imports of drugs from abroad, said health policy lawyer Paul Kim. "The order's suggestion of broader or direct-to-consumer importation stretches well beyond what the statute allows," Kim said.

The FTC has a long history of antitrust enforcement actions against pharmaceutical and other healthcare companies. Trump last month ordered the FTC to coordinate with other federal agencies to hold listening sessions on anticompetitive practices in the drug industry. On Monday, he was expected to ask the FTC to consider taking enforcement action, sources said.

"President Donald Trump campaigned on lowering drug costs and today he’s doing just that. Americans are tired of getting ripped off. The Federal Trade Commission will be a proud partner in this new effort," said FTC spokesperson Joe Simonson.

Shares of major drugmakers, after initially falling during premarket trading, rallied on Monday, despite the wide-ranging order. Shares of Merck (MRK.N), opens new tab rose 5.2%, while Pfizer (PFE.N), opens new tab gained 3.2% and Gilead Sciences (GILD.O), opens new tab was up 6.7%. Eli Lilly (LLY.N), opens new tab, the world's largest drugmaker by market value, rose 2.4%.

The executive order differed from what drugmakers had been expecting. Four lobbyist sources told Reuters they were expecting an executive order that called for "most favored nation" pricing on a subset of Medicare drugs.

"Implementing something like this is pretty challenging. He tried to do this before and it was stopped by the courts," said Evan Seigerman, analyst at BMO Capital Markets.

The White House officials did not specify any targets.

Trump's order also directs the government to consider facilitating direct-to-consumer purchasing programs that would sell drugs at the prices other countries pay.

It also orders the Secretary of Commerce and other agency heads to review and consider actions regarding the export of pharmaceutical drugs or ingredients that may contribute to price differences. The Commerce Department did not immediately respond to a request for comment.

Source: Reuters

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Gerik

Economic

China–U.S. Trade War

Washington Reaffirms Commitment to Economic Engagement with China

At a press conference in Geneva on May 12, US Treasury Secretary Scott Bessent reaffirmed that the United States has no intention of severing economic ties with China. Instead, he emphasized the importance of establishing a more balanced and sustainable trade relationship. His remarks followed an intense week of negotiations that resulted in a landmark joint statement to ease tariff tensions over the next 90 days.

Bessent clarified that both delegations agreed decoupling is undesirable. He stated, “What we’ve seen with these extremely high tariffs is tantamount to an embargo. No one wants that. What we want is trade—fair and reciprocal trade.”

New Tariff Agreement Marks Strategic Pause in Trade Tensions

As outlined in the joint statement released on May 12, both countries have committed to significant reciprocal reductions in tariffs. Starting May 14, the US will lower its tariffs on Chinese goods from 145% to 30%, while China will reduce its import duties on American goods from 125% to 10%. This 115-percentage-point rollback will remain in effect for the initial 90-day period.

Additionally, China has pledged to suspend non-tariff retaliatory measures it imposed since April 2. These included placing rare earths under export controls, launching anti-dumping investigations against DuPont, and blacklisting a range of US defense and tech companies.

Under the new terms, companies previously targeted in the April countermeasures will be removed from China’s restricted lists, and the investigation into DuPont will be suspended. However, punitive actions announced before April 2—including those involving Google and earlier sanctions—will remain in place, creating a partial détente rather than a full rollback.

Chinese Officials Welcome Dialogue-Based Resolution Mechanism

At a parallel press event, Chinese officials described the agreement as a “significant step” toward enhancing mutual cooperation. The Ministry of Commerce acknowledged that elevated US tariffs had seriously disrupted both bilateral trade flows and global economic order. The joint statement, they noted, reflects a shared desire to resolve disputes through dialogue and consultation, and lays the groundwork for deeper cooperation.

A dedicated mechanism for ongoing consultation on trade and economic matters will be established during the 90-day pause. This suggests that both countries aim to use this window not just for temporary relief, but to redesign a more predictable and mutually acceptable framework for long-term engagement.

Lingering Tariffs and Sectoral Disruptions Signal Continued Risk

Despite progress, key issues remain unresolved. The US will retain a 20% tariff on products linked to fentanyl-related chemicals—an area of national concern—while several other punitive measures remain active. The partial nature of the agreement highlights that this is a fragile truce rather than a comprehensive resolution.

Trade disruptions have already inflicted measurable damage. US GDP recorded its first quarterly contraction since 2022, driven in part by a surge in pre-tariff inventory accumulation. On the Chinese side, exports to the US plummeted last month, placing renewed pressure on its manufacturing sector. April manufacturing activity contracted at its fastest pace in 16 months, prompting Beijing to accelerate fiscal stimulus and liquidity support.

The scale of the disruption was further underscored by logistics data: on May 9, no ships from China docked at two major West Coast US ports for 12 consecutive hours—a highly unusual event not seen since the height of the COVID-19 pandemic.

The Geneva negotiations represent a turning point in US-China economic relations—not as a return to past normalcy, but as a recalibration of expectations. While geopolitical competition continues to shape the broader relationship, this round of diplomacy signals recognition on both sides of the high economic cost of prolonged confrontation. The language used by US officials marks a strategic retreat from decoupling rhetoric, in favor of restoring a baseline for predictable economic exchange. Whether this 90-day reprieve can evolve into structural realignment will depend on follow-through, not only in tariff policy but in restoring trust across key sectors.

Source: CNN

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Adam

Economic

Federal Reserve Governor Adriana Kugler said Monday that steeper tariffs will drive prices higher, acting to push down incomes and lower economic growth.

“Although higher tariffs on U.S. imported goods may affect our macroeconomy through many channels…I think they will primarily act as a negative supply shock, raising prices and decreasing economic activity,” Kugler said in a speech in Dublin, Ireland.

Kugler’s comments come even as the US and China have agreed to de-escalate and slash tariff rates by 115 percentage points for 90 days as both sides discuss fairer trade between the two countries.

The move will drop American tariffs on Chinese goods, which currently run as high as 145%, to 30% and slash China's retaliatory duties from 125% to 10%.

“Trade policies are evolving and are likely to continue shifting, even as recently as this morning,” she noted.

Given what Kulger sees as upside risks to inflation and a "somewhat restrictive" level on interest rates now, she said she supported holding rates steady at the policy meeting last week.

"Ultimately, I see the U.S. as likely to experience lower growth and higher inflation," she said.

Kugler is the latest central bank policymaker to warn about higher inflation, elevated unemployment, and slower economic growth this year, following similar comments Friday from Federal Reserve governor Michael Barr and New York Fed president John Williams.

The comments from the policymakers highlight the dilemma for the central bank as it tries to weigh both sides of its mandate — stable prices and maximum employment — at a time when the true effects of White House trade policies on the economy are still unknown.

Their warnings also echo observations recently expressed by Fed Chair Jerome Powell, who on Wednesday reiterated that he would wait for greater clarity on the impact of Trump's tariffs before deciding on a path for monetary policy going forward.

All Fed officials on Wednesday voted unanimously to maintain the Fed's benchmark interest rate in the range of 4.25% to 4.5%, a mark reached at the end of 2024 after cutting rates by a full percentage point last fall.

The White House is intensifying its pressure on the Fed to consider lowering rates to cushion any future economic slowdown.

Trump himself has repeatedly called for the Fed to ease its policy stance and did so again in the Oval Office on Thursday, saying Powell didn't want to lower rates because "he's not in love with me." He also resurfaced his contention that Powell has a history of moving too late on monetary policy.

"'Too Late' Jerome Powell is a FOOL, who doesn’t have a clue," Trump said in a separate social media post on Thursday.

The 90-day pause announced by the US and China on Monday does alleviate some pressure, and investors responded by sending stocks higher.

But Kugler said changes in trade policy appear likely to generate significant economic effects even if tariffs stay close to the currently announced levels, and that uncertainty associated with tariffs has already impacted the economy through front-loading, sentiment, and expectations.

The Fed governor said that while uncertainty remains about the ultimate level of the average tariff rate, currently announced average tariffs are still “much higher” than in the past many decades.

Kugler warned if tariffs remain significantly larger relative to earlier in the year, the same is likely to be true for the economic effects, which she says would include higher inflation and slower growth.

Given what she expects to be price increases from tariffs, she said she expects incomes adjusted for inflation will fall, and businesses operating costs will rise, which will lead consumers to demand fewer final goods and services and firms to demand fewer inputs.

Over time, Kugler said there could also be significant effects on productivity. As firms adjust to the higher parts costs and lower demand, she said they could cut back on capital investment and shift to a less-efficient combination of parts.

In the near term, Kugler expects higher import costs will raise prices for both consumer goods and inputs to production. While she says imported goods only represent 11% of GDP, she warned tariffs on so-called intermediate goods – parts used to make products—like aluminum and steel could impact the prices of many goods and services.

Kugler referenced comments from the Dallas Fed’s survey of Texas business executives, which found that 55 percent of businesses expect to pass through most or all of the costs from higher tariffs to customers.

Of those expecting to pass on costs, 26 percent expect to pass through the higher tariff cost upon the announcement of tariffs, and 64 percent expect this pass-through to occur within the first three months after the tariffs take effect.

Kugler noted that suggests to her that price increases may be occur soon.

On inflation, Kugler said she has taken note of the increase in longer-term inflation expectations from the Michigan survey, which reached the highest level since June 1991.

“With inflation and employment potentially moving in opposite directions down the road, I will closely monitor developments as I consider the future path of policy,” she said.

Source: finance.yahoo

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Devin

Central Bank

The European Central Bank is tipped to slash borrowing costs three more times this year, bringing its key deposit rate down to 1.5% by the end of 2025, according to analysts at Deutsche Bank.

But in a note to clients, the brokerage warned that there are "two-sided risks" to this estimate.

In one scenario, the implementation of partially-delayed U.S. tariffs leads to a "growth shock" in the eurozone, persuading the ECB to bring policy rates below the 1.5% level.

Another outcome revolves around broader economic "resilience" stopping an ongoing ECB rate easing cycle before borrowing costs dip to 1.5%.

"Our baseline continues to have the ECB cutting rates by 25 basis points in June, September and December," the analysts wrote.

They added that, due to ructions in stock and bond markets after Trump first announced his punishing tariffs in early April and the possibility that the tariffs could be "disinflationary" in the eurozone, the ECB recent easing cycle may continue and the 1.50% terminal rate might be reached in September.

Last month, the ECB cut interest rates as widely expected in an attempt to boost a eurozone economy that had been struggling even before the unveiling of U.S. President Donald Trump’s sweeping "reciprocal" tariffs.

Policymakers have also noted that both headline and core inflation declined in March, while services sector price gains have also cooled markedly over recent months -- potentially suggested that inflation could settle at around the ECB’s 2% medium-term target on a sustained basis.

The central bank slashed its benchmark deposit rate by 25 basis points to 2.25%, the seventh reduction in a year, while the interest rate on its main refinancing operations fell to 2.40% and its marginal lending facility dropped to 2.65%.

The eurozone economy has been building up some resilience against global shocks, the central bank said, but the outlook for growth has deteriorated owing to rising trade tensions.

Although Trump has postponed his elevated tariffs on the European Union, which includes many eurozone countries, other levies remain in place, such as universal 10% duties and tariffs on items like steel, aluminum and autos.

"Increased uncertainty is likely to reduce confidence among households and firms, and the adverse and volatile market response to the trade tensions is likely to have a tightening impact on financing conditions," the ECB said. "These factors may further weigh on the economic outlook for the euro area."

ECB officials have estimated that growth across the 20 countries that share the euro currency could fall by half a percentage point this year if the tariffs are eventually imposed.

Source: Investing

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Adam

Stocks

China–U.S. Trade War

Market watchers have labeled the new U.S.-China deal to temporarily cut tariffs “better than expected,” “more workable” and even a “dream scenario” — and are expecting more near-term relief for investors.

Under the deal, so-called reciprocal tariffs will drop from over 100% to 10% on both sides. The Trump administration will keep 20% fentanyl-related tariffs on China in place, meaning America’s total duties on Chinese imports will stand at 30% while the 90-day pause is effective.

Stocks in Europe and Asia rallied after the terms of the U.S.-China agreement were announced, with Europe’s Stoxx 600 index gaining 1%, Germany’s DAX hitting a 1-year high, and Hong Kong-listed shares jumping by around 3%.

On Wall Street, U.S. stock futures also pointed to a rally, with Nasdaq futures up 3.8%, S&P 500 futures rising by 2.8% and Dow Jones Industrial Average futures gaining 3.1%.

Analysts and strategists said on Monday that the new U.S.-China arrangement could reignite risk-on sentiment, benefiting stocks and U.S. assets.

In a note to clients on Monday, Tai Hui, chief market strategist for Asia Pacific at JPMorgan Asset Management, said the deal unveiled in Geneva was better than anticipated, but uncertainty remained.

“The magnitude of this tariff reduction is larger than expected,” he said, although he noted that it would be difficult for Beijing and Washington to reach a more concrete trade arrangement in just three months.

“The 90-day period may not be sufficient for the two sides to reach a detailed agreement, but it keeps the pressure on the negotiation process,” Hui said. “We are still waiting for further details on other terms of this agreement, for example, whether China would relax on rare earth export restrictions.”

However, Hui acknowledged the positive market reaction to the news.

“Overall, we expect the market to get back on to a risk-on sentiment in the near term,” he said. “Pressure on the [Federal Reserve] to cut rates may also ease for the time being.”

End of the ‘Sell America’ narrative?

Jordan Rochester, head of currency strategy EMEA and executive director at Mizuho Bank in London, touted the deal as “much better news than expected” in a Monday morning note. He argued that the developments would mean “the ‘Sell America’ narrative [gets] squeezed.”

U.S. assets, including the dollar , Treasurys and stocks, have seen major volatility in the weeks since Trump unveiled the full extent of his tariffs plans.

On Monday morning, the U.S. dollar index , which measures the value of the greenback against a basket of major currencies, was up 1%. The yield on the benchmark U.S. 10-year Treasury note was up by 6 basis points as the price edged lower.

According to Rochester, the 90-day deal takes the effective U.S. tariff rate — what Chinese companies will actually end up paying — from 108.8% to 27%, which he noted was well above the market consensus of a reduction to the range of 50% to 60%.

“It is also notable how [officials] played down the requirement for talks to continue past 90 days in the press conference with ‘as long as talks are constructive,‘” he said. “What this means for international trade is the de facto ‘tariff wall’ has been lowered to something more workable and also raises the market pricing of other countries to get similar treatment when in talks with the US down the line.”

The better-than-expected results from the trade negotiations mean stocks could rally further, according to Wall Street strategists.

“Although stocks have rebounded, there is still much dispersion [between] domestics and exporters under the hood, dollar risk premium remains high, and overall positioning is light/defensive,” Emmanuel Cau, head of European equity strategy at Barclays, said in an emailed statement. “Pain trade to the upside means stocks have room to overshoot.”

‘Stay bullish’

Meanwhile, strategists at Deutsche Bank said their sentiment had been significantly boosted by the morning’s news. They are now expecting U.S. stocks to outperform their European rivals in the short term.

“Today’s announcement even exceeds our constructive expectations,” they said. “In our view, this announcement is not only better than we expected but also better than the market would have expected back in March.

“Although it is hard to tell how this will develop after the 90-day period, the implications for markets are clearly supportive ... Stay bullish and consider stepping back into China tariff-exposed sectors (ex Autos, Health Care and Chips).”

Mikkel Emil Jensen, senior analyst at Sydbank, said the 90-day tariff pause marked a major de-escalation in the U.S.-China trade war.

″[It] removes a large chunk of uncertainty related to world trade — at least for now,” Mikkel Emil Jensen, senior analyst at Sydbank, told CNBC after the news was announced.

“The deal might be temporary, but the deal is better than expected and could ignite positive ripple effects on global trade and increase the demand for container freight,” the Sydbank analyst said. Shares of shipping giant Maersk were over 12% higher on Monday morning.

“More so, the temporary deal might boost the front-loading effect, triggering companies to increase inventories before a potential worsening of the trade war,” Jensen added.

‘Dream scenario’

Also reacting to the news, Wedbush’s Dan Ives said he believed the U.S.-China deal was “clearly just the start of broader and more comprehensive negotiations,” describing the news as “a huge win for the market and bulls.”

“We would expect both these tariff numbers to move down markedly over the coming months as deal talks progress,” he said in a note. “The baseline view heading into the weekend was some de-escalation of US/China tariffs and the agreement for more talks ... instead in a dream scenario this morning [officials] came out of these talks with massive cuts to reciprocal tariffs.”

Ives, who’s known for his bullish outlook on tech, argued that the agreement meant new highs for markets and tech stocks were “now on the table in 2025.”

Trade between the world’s two largest economies is expected to swiftly resume following the cut in tariffs, reversing the decline in freight vessels and shipping containers since the tariffs announcement in early April.

Lindsay James, investment strategist at Quilter, said the new deal was “not quite as good as the 20% level that existed before so-called Liberation Day,” but added that the temporary agreement would enable “a considerable proportion of trade resume, albeit at slightly higher prices.”

Cnbc: source

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Adam

Economic

China–U.S. Trade War

The Federal Reserve got one more reason to wait on cutting interest rates after a delay of the most punitive tariffs imposed in the Trump administration's trade battle with China appeared to reduce the chance of a U.S. economic slowdown that would force the central bank to rush to the rescue by reducing borrowing costs.

With U.S. bond yields rising and stock futures pointing to higher equity prices, traders of contracts tied to the Fed's benchmark interest rate pushed out bets for an initial rate reduction to September, and now see only a half-point reduction by year's end.

A dollar rising after the announcement that tariffs would be lowered for now would also, all things equal, help temper inflation.

The Fed last week kept its target for short-term borrowing costs in the 4.25%-4.50% range. Fed Chair Jerome Powell said that with few signs to far that tariffs are slowing the job market but inflation still above the Fed's 2% goal, the right move for now is to keep rates where they are until there is more clarity.

Markets had been expecting that the Fed would see a need to cut by July, and priced in a total of three quarter-point interest-rate cuts over the course of the year, based on trading in futures that settle to the Fed's policy rate. Those expectations shifted after U.S. and Chinese negotiators said they would limit initial tariff increases for 90 days while discussing a more comprehensive deal.

The U.S. lowering to 30% in tariffs that had reached 145% on Chinese imports "significantly reduces the risk of goods shortages and higher inflation," analysts from Citi said. "The Fed can now more comfortably stay 'patient.'

Source: reuters

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Thomas

Economic

President Donald Trump on Monday revived a controversial policy that aims to slash drug costs by tying the prices of some medicine in the U.S. to the significantly lower ones abroad.

Trump signed an executive order including several different actions to renew that effort, known as the “most favored nation” policy. He did not refer to specific nations, but signaled that he would target other developed countries because “there are some countries that need some additional help, and that’s fine.”

“Basically, what we’re doing is equalizing,” Trump said during a press event on Monday. “We are going to pay the lowest price there is in the world. We will get whoever is paying the lowest price, that’s the price that we’re going to get.”

White House officials did not disclose which medications the order will apply to, but said it will impact the commercial market as well as Medicare and Medicaid. They said Monday’s announcement will be broader than a similar policy that Trump tried to push during his first term, which only applied to Medicare Part B drugs.

Officials added that the administration will have a particular focus on drugs that have the “largest disparities and largest expenditures,” which could include popular weight loss and diabetes treatments called GLP-1 drugs.

It’s unclear how effective the policy will be at lowering costs for patients. In a social media post on Monday, Trump claimed drug prices will be cut by “59%, PLUS!”

But Trump during the press event claimed drug prices may fall even more, between 59% and 80%, or “I guess even 90%.”

Shares of U.S. drugmakers rose Monday. Merck’s stock added more than 4%, while Pfizer and Amgen climbed more than 2%

How Trump’s drug pricing order will work

Part of the order takes aim at nations abroad, which have more power to negotiate down drug prices with pharmaceutical companies.

"Starting today, the United States will no longer subsidize the health care of foreign countries, which is what we were doing," Trump said, adding the U.S. "will no longer tolerate profiteering and price gouging from Big Pharma."

He added that "it was really the countries that forced Big Pharma to do things that, frankly, I'm not sure they really felt comfortable doing."

The order directs the Office of the U.S. Trade Representative and the Department of Commerce to crack down on "unreasonable and discriminatory policies" in foreign countries that "suppress" drug prices abroad, the officials said.

"We are going to be working to make sure that countries aren't being unfair in their negotiations with pharmaceutical companies, right?" one official said. Drugmakers are "constantly complaining" about being put "in an untenable situation when in these negotiations" because those companies typically have to broker drug discounts with entire countries, the official added.

Unlike the U.S., several foreign countries offer universal health coverage where the government is the sole payer, giving it significant leverage to negotiate or set drug prices.

White House officials said they expect drugmakers to provide discounts across the board to "reciprocate" the actions the Trump administration is taking to address prices abroad.

Trump's order also directs the secretary of the Department of Health and Human Services to establish a pathway for U.S. patients to buy their drugs directly from manufacturers at "most favored nation" prices, bypassing middlemen.

"We're going to cut out the middlemen and facilitate the direct sale of drugs at the most favorite nation price, directly to the American citizen," Trump said.

Within 30 days, the secretary will also have to set clear targets for price reductions across all markets in the U.S., according to the officials. That will open up a round of negotiations between HHS and the pharmaceutical industry, officials said, not providing exact details on the nature of those talks.

If "adequate progress" is not made towards those price targets, HHS Secretary Robert F. Kennedy Jr. will impose the most favored nation pricing on drugs through rulemaking.

The order also directs the Food and Drug Administration to consider expanding imports from other developed nations beyond Canada. Trump signed a separate executive order in April directing the Food and Drug Administration to improve the process by which states can apply to import lower-cost drugs from Canada, among other actions intended to lower drug prices.

Monday's order also directs the Department of Justice and Federal Trade Commission to aggressively enforce "anti-competitive actions" that keep prices high in the U.S.

The Department of Commerce will also consider export restrictions that "fuel and enable that low pricing abroad."

It is Trump's latest effort to try to rein in U.S. prescription drug prices, which are two to three times higher on average than those in other developed nations – and up to 10 times more than in certain countries, according to the Rand Corporation, a public policy think tank.

The order is a blow to the pharmaceutical industry, which is already bracing for Trump's planned tariffs on prescription drugs. Drugmakers have argued that the "most favored nation" policy would hurt their profits and ultimately, their ability to research and develop new medicines.

White House officials contended that pharmaceutical companies will continue to make money after the price cuts if they realize that the U.S. "alone is not going to pay for innovation" and if they increase prices abroad to get additional revenues there.

Drugmakers "should pursue deals where they get financially rewarded commensurate the value that they are providing to other nations, health systems," one official said.

"Other countries should pay research and development too. It's for their benefit," Trump added on Monday.

The policy could help patients by lowering prescription medication costs, which is an issue top of mind for many Americans. More than three in four adults in the U.S. say the cost of medications is unaffordable, according to a KFF poll from 2022.

The industry also lobbied against similar Trump plans during his first term. He tried to push the policy through in the final months of that term, but a federal judge halted the effort following a lawsuit from the pharmaceutical industry. The Biden administration then rescinded that policy.

White House officials initially pressed congressional Republicans to include a "most favored nation" provision in the major reconciliation bill they plan to pass in the coming months, but the policy would have specifically targeted Medicaid drug costs, Politico reported earlier this month. Several GOP members opposed that measure.

The effects on patients, companies

The industry's largest trade group, PhRMA, estimated that Trump's Medicaid proposal could cost drugmakers as much as $1 trillion over a decade.

Some health policy experts have said a "most favored nation" drug policy may not be effective at lowering medication costs.

For example, USC experts said the policy "can't undo the basic economics of the global drug marketplace," where 70% of pharmaceutical profits worldwide come from the U.S.

"Facing a choice between deep cuts in their U.S. pricing or the loss of weakly profitable overseas markets, we can expect many firms to pull out from overseas markets at their earliest opportunity," experts said in a report in April.

That will leave Americans paying the same amount for medications, drugmakers with lower profits and future generations of patients with less innovation, they said.

"In sum, everyone loses," the experts said.

Other experts have said another legal fight with the pharmaceutical industry could prevent the policy from taking effect.

But even if the drug industry pushes back on Trump's executive order, his administration still has another tool to push down drug prices: Medicare drug price negotiations.

It's a key provision of the Inflation Reduction Act that gives Medicare the power to negotiate certain prescription drug prices with manufacturers for the first time in history.

Trump last month proposed a change to that policy that drugmakers have long sought. Lawmakers on both sides of the aisle could be receptive to the idea, which proposes changing rules that differentiate between small-molecule drugs and biologic medicines.

Trump last week said he plans to announce tariffs on medicines imported into the U.S. within the next two weeks. Those planned levies aim to boost domestic drug manufacturing.

Drugmakers, including Eli Lilly and Pfizer, are pushing back on those potential duties. Some companies have questioned whether the tariffs are necessary, given that several of them have already announced new U.S. manufacturing and research and development investments since Trump took office.

Still, Trump last week doubled down on efforts to reshore drug manufacturing. He signed an executive order that streamlines the path for drugmakers to build new production sites.

Caplan noted that even if the drug industry pushes back on the executive order, the administration still has another tool at its disposal: Medicare drug pricing negotiations.