Trump renews push for most-favored-nation drug pricing. What it all means.

The plan, which he previewed in a social media post on Sunday, brings back a proposal from Trump’s term, the so-called most-favored nation drug policy.

“I will be instituting a MOST FAVORED NATION’S POLICY whereby the United States will pay the same price as the Nation that pays the lowest price anywhere in the World," Trump wrote on Sunday. He said he planned to sign the executive order at 9 a.m. on Monday.

The announcement is a reversal from his 2024 campaign, which walked back the drug pricing proposal, much to the pharmaceutical industry’s relief.

Drug stocks are likely to be newly pressured by Trump’s order. In recent years, the drug industry had been upset with President Joe Biden’s drug-price negotiation program, which allows Medicare to pay less for certain medicines.

“The public wants the pharmaceutical industry whacked, and a politician making a promise right before the election and then walking away from it is not exactly groundbreaking," says Chris Meekins, a healthcare policy analyst at Raymond James.

Late last week, CBS News and Politco reported the most-favored nation plans.

At the time, spokespeople for the Department of Health and Human Services didn’t respond to a request for comment from Barron’s.

Trump’s Sunday night post pointed toward a more sweeping order than experts and analysts had anticipated last week. The reaction of healthcare stocks will depend on the details announced Monday morning.

Here’s what to know about most-favored-nation pricing, and what it would mean for drugmakers.

What is it?

“Most favored nation" is the name the Trump administration gave to a 2020 rule that would have pegged the prices Medicare pays for certain drugs to a so-called international reference price. The reference price would have been based on the lowest price paid for the same medicine by other wealthy nations.

The idea hinges on the fact that drug companies set U.S. list prices that are far higher than prices paid overseas. While most other nations have some form of government regulation of drug prices, the U.S. had none before Biden’s limited drug-price negotiation program was created in 2022.

That is one reason why Novo Nordisk’s weight-loss drug Wegovy has a list price of $1,339 a month in the U.S., and costs $328 a month in Germany, according to the health-policy group KFF. According to a 2024 report commissioned by HHS, U.S. list prices for brand-name prescription drugs were 422% higher on average than prices in other wealthy nations. Even if you adjust for the rebates that drugmakers pay to pharmacy-benefit managers in the U.S., U.S. prices are 308% higher.

These vast disparities have brought complaints from both parties. “All we are saying, Mr. Jørgensen, is treat the American people the same way that you treat people all over the world," Sen. Bernie Sanders of Vermont told Novo’s CEO, Lars Fruergaard Jørgensen, in a November hearing. “Stop ripping us off."

The Trump rule from 2020 would have only applied to drugs paid for by Medicare Part B, and not the Part D prescription drug plan. Part B pays for drugs administered by doctors, not drugs people take at home. Cancer medicines like Merck’s Keytruda would have been included, but weight-loss drugs like Wegovy would not.

At the time, the Centers for Medicare and Medicaid Services estimated the plan would “save American taxpayers and beneficiaries more than $85 billion over seven years."

What else do we know right now about what Trump is planning?

This is a strange and uncertain moment for the healthcare industry as companies and investors try to keep track of a long, shifting list of threats. Most-favored-nation pricing is only one of those.

Trump has threatened sector-specific drug tariffs, which are expected to be announced soon, though experts can only guess at the details. Early last week, analysts were warning that the Republican budget bill might include a most-favored-nation pricing scheme for Medicaid. Now, attention has shifted to the Trump executive order, which is thought to be focused on Medicare. Still, anything could happen.

“Will Medicare be included? Will Medicaid be included? Which countries will be considered for international reference pricing? Will it be the lowest price in these countries? Will it be an average price?" asks Tricia Neuman, a senior vice president at KFF and executive director of its Program on Medicare Policy. “These sound like technical questions, but they actually could have a huge impact."

Meekins’s best guess is that a new executive order will focus on Medicare Part B, like the 2020 plan, and that it will instruct the Center for Medicare & Medicaid Innovation to set up a pilot program. “They did Part B before and it was struck down by the courts, but it was over procedural issues," he said. “So they think they could resurrect it if they do it the right way this time."

OK, so what would that mean for drugmakers?

It wouldn’t be great for pharmaceutical companies. With the major caveat that it’s still difficult to know what Trump and his allies are planning, a most- favored-nation pricing plan for Medicare Part B could mean big hits to drugmakers’ earnings.

Medicare Part B spends the most on cancer drugs like Merck’s Keytruda, Bristol Myers Squibb’s Opdivo, and Johnson & Johnson’s Darzalex Faspro, among others. Regeneron’s eye drug Eylea is another big item in the Medicare Part B budget.

These drugs cost Medicare more than buyers in other countries pay for them. According to a 2024 report issued by the majority staff of the U.S. Senate’s Health, Education, Labor, and Pensions Committee, Keytruda costs $191,000 a year in the U.S., compared with $44,000 in Japan, $91,000 in France, and $115,000 in the U.K.

We can only guess what Trump would do about this. For investors, much depends on the details. Many of these medicines are already facing patent expirations, or are expected to be eligible for lower prices in 2028 due to Medicare price negotiation.

Analysts haven’t made firm projections. In an April 22 note, Leerink Partners analyst David Risinger estimated the proportion of pharma companies’ revenue that come from Medicare Part B: Merck was the highest, at 19%, followed by Amgen at 18%.

In a note on Friday, Cantor Fitzgerald analyst Carter Gould made guesses about the earnings impact on pharmaceutical companies companies if CMS cut the prices that both Medicare and Medicaid pay. The numbers don’t reflect the intricacies of how an executive order might actually work, but Gould estimated that with a 10% price cut across CMS, Pfizer earnings would take a 7.5% hit in 2026, while the respective effects at Merck and Eli Lilly would be 6.5% and 4.3%.

What about the rest of the healthcare system?

Drug distributors’ shares had fallen hard on Thursday as worry about most favored nation ramped up. McKesson dropped 4.5%, Cencora fell 6.8%, and Cardinal Health fell 4.1%. In a note Thursday, Leerink analyst Michael Cherny wrote that investors were worried that lower prices on Part B drugs would mean lower profits for the distributors, who at times are paid based on the cost of the drug they distribute.

There are also implications for doctors, whose payments are based on the prices of the drugs they administer. Trump’s 2020 most-favored- nation rule would have changed how doctors are paid to administer these types of medicines.

What does the industry say?

“Government price setting in any form is bad for American patients," said Alex Schriver, senior vice president at the drug industry lobby group PhRMA, in a statement to Barron’s. “At a time when we are facing growing competition from China, policymakers should focus on fixing the flaws in the U.S. system, not importing failed policies from abroad."

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com