Most-Favored-Nation Drug Pricing: Executive Order Sets Forth Potential U.S. Major Policy Shift

Earlier this week, President Donald Trump signed an executive order aimed at tying U.S. drug prices to prices paid in other countries, an unfulfilled priority from the President’s first administration (see here and here). The order lays out possible next steps and consequences — including rulemaking, prescription drug importation, enforcement actions, and revocation of product approvals — if “significant progress” is not made to implement “most-favored-nation” pricing targets that the executive order directs certain executive agencies to identify for prescription drugs.

The executive order calls for the following actions:

1. Most-Favored-Nation Pricing Targets in 30 Days. The executive order requires the Secretary of Health and Human Services (HHS), in coordination with the Assistant to the President for Domestic Policy, the Administrator for the Centers for Medicare & Medicaid Services, and other relevant agency officials, to communicate most-favored-nation price targets to pharmaceutical manufacturers by June 11 in an effort to “bring prices for American patients in line with comparably developed nations.”
   
2. “Significant Progress.” The executive order states that if “significant progress towards most-favored-nation pricing for American patients is not delivered,” the Secretary of HHS shall (i) propose a rulemaking plan to impose most-favored-nation pricing through regulation and (ii) consider permitting the importation of prescription drugs from developed nations with low-cost prescription drugs.
   
   Although the contours of this policy are yet unknown, with few exceptions, the Food and Drug Administration (FDA) lacks statutory authority to allow prescription drug importation from any country except for Canada. And the viability of the Canadian importation program has faced challenges in light of the statutory requirement to show that importation would significantly reduce the cost of these drugs to the American consumer without imposing additional risk to public health and safety.
   
   The executive order goes on to state that if significant progress is not made, other government agencies must consider additional actions to support the most-favored-nations policy including by (i) undertaking enforcement actions against anticompetitive practices, (ii) reviewing export policies for prescription drugs and precursor materials, and (iii) reviewing and potentially modifying or revoking FDA approvals for drugs.

3. Direct-to-Consumer Purchasing Programs at Most-Favored-Nation Pricing. The executive order directs the Secretary of HHS to “facilitate direct-to-consumer purchasing programs for pharmaceutical manufacturers that sell their products to American patients at the most-favored-nation price.”
   
4. Pricing in Other Countries. The executive order instructs the Secretary of Commerce and the U.S. Trade Representative to “take all necessary and appropriate action to ensure foreign countries are not engaged in any act, policy, or practice that may be unreasonable or discriminatory or that may impair United States national security and that has the effect of forcing American patients to pay for a disproportionate amount of global pharmaceutical research and development, including by suppressing the price of pharmaceutical products below fair market value in foreign countries.”

Other than the first deadline within 30 days, the executive order does not provide a timeline for implementation of the stated policies. The executive order also does not cite a specific statutory basis for the noted measures.

Although the administration has publicly suggested that the most-favored-nation pricing policy could extend to products reimbursed by Medicare, Medicaid, and commercial insurance, the executive order does not specify which specific government programs might be involved or whether commercial insurance markets are within scope. The executive order also does not address whether drugs subject to a “Maximum Fair Price” under the Inflation Reduction Act Drug Price Negotiation Program will be affected or exempted by the most-favored-nation policy.

Sidley will continue to closely monitor any legislative or agency actions related to this executive order.