Aimed At Pressuring Big Pharma; Goldman Says Trump’s Drug Exec. Order “Symbolic, Not Substantial”

On Monday, President Donald Trump signed the Most Favored Nation (MFN) Executive Order on drug pricing, aiming to pressure the pharmaceutical industry to lower prices by linking them to those paid in other developed countries. The order directs the Department of Health and Human Services (HHS) to communicate these international price benchmarks to drug manufacturers. If significant progress isn’t achieved within several months, HHS is instructed to initiate a rulemaking process to enforce MFN-based pricing.

Following the MFN EO on drug pricing, Goldman analysts Asad Haider and team noted that stocks most exposed to the EO—such as Regeneron and Merck—rallied sharply, as both the text of the order and the subsequent press briefing alleviated worst-case fears priced into pharma stocks. 

According to Goldman’s political economist Alec Phillips, the EO appears more designed to increase the Trump administration’s negotiation leverage than to implement sweeping reforms immediately. The analyst expects the HHS to impose MFN-based pricing if no “significant progress” is made within several months.

The EO’s language is legally cautious. It repeatedly cites the need to act “consistent with law” and lacks clarity on scope—such as whether it applies to Medicare Part B, D, or both.

“Overall, while the EO appears intended to create leverage for negotiation with the industry and is likely to increase pressure on companies to announce some concessions, our political economist notes that the process appears to be in early stages and does not expect near-term implementation of the measures contemplated in the EO,” Haider told clients on Tuesday.

Haider continued, “Our net takeaway is that while the EO removes a potential worst-case scenario, we expect drug pricing to remain a focus and note that clarity across other policy, regulatory, and tariff-related vectors is needed for large-cap biopharma to see a sustained recovery.” 

Here’s Alec Phillips’ first-take 

President Trump’s executive order (EO) on “most favored nation” (MFN) drug pricing could lead to discussions with pharmaceutical companies regarding potential price concessions but does not look likely to lead to substantial near-term policy changes. It orders the Dept. of Health and Human Services (HHS) to communicate price targets to pharmaceutical manufacturers based on prices paid in other developed economies. If “significant progress” has not been achieved on drug pricing after an unspecified period of time—we would expect the White House to give the industry at least several months—the order instructs HHS to propose a “rulemaking plan” to impose MFN pricing. The EO is unclear on whether this would apply only to drugs covered under Medicare and, if so, whether it would apply to all drugs and whether it would apply to Medicare Part B, D or both. In the event “significant progress” is not made, the EO also instructs: (1) HHS to certify safety of drug reimportation, (2) FTC and DOJ to take enforcement action against anti-competitive practices, (3) the Dept. of Commerce to “review and consider” exports of pharmaceuticals, and (4) FDA to “review and potentially modify or revoke” drug approvals. The order also instructs US Trade Representative to guard against “unreasonable or discriminatory” practices in other countries that raise prices in the US, including foreign price controls, and tells HHS to “consider” a program to sell direct to consumer at MFN prices.

Overall, the EO appears intended to create leverage for negotiation with the industry and is likely to increase pressure on companies to announce some concessions. That said, this process appears to be in early stages and we would not expect near-term implementation of any of the measures contemplated in the EO. Later this year, the main question will be whether the administration has authority to implement these kinds of changes unilaterally. With regard to Medicare, the administration has authority to negotiate discounts on 15 drugs this year under the Inflation Reduction Act (IRA), and could potentially pursue broader price concessions as part of a CMMI demonstration. However, Medicaid pricing (rebates) is set in statute, and the administration has limited ability to constrain prices in the private market. In theory, Congress could affect these areas, but for now neither looks likely to be included in the House’s budget reconciliation package.

Overall, analysts view the EO as primarily a negotiation tool rather than a blueprint for immediate reform. The goal is to bring big pharma to the table to negotiate lower drug prices, allowing the Trump administration to advance its price reduction agenda.