Lowering Drug Prices by Putting America First
This is an executive order issued by President Donald J. Trump on July 24, 2020, titled “Lowering Drug Prices by Putting America First.” It directs the federal government, primarily the Department of Health and Human Services (HHS), to explore and test a new payment approach for Medicare Part B drugs and biological products. The core idea is to cap what Medicare Part B pays for certain high-cost drugs at the “most-favored-nation” (MFN) price—the lowest price that the manufacturer offers in other developed countries with similar wealth, after adjusting for differences in volume and economic size. The order frames this as a way to reduce Americans’ out-of-pocket costs and federal spending, and to prevent the United States from subsidizing drug prices in other countries. It explicitly calls for rulemaking and testing rather than an immediate nationwide change, and it preserves existing legal authorities and budget constraints. In short, the order sets up a plan to test paying no more than MFN prices for certain Part B medicines, with the goal of lowering prices if the test shows improved outcomes and reduced spending. It is a policy directive, not a new law, and requires subsequent rulemaking, adherence to law, and appropriations to implement.
Key Points
- 1Policy goal and price standard
- 2- Medicare Part B should not pay more for costly drugs or biologics than the MFN price, defined as the lowest price offered in a comparable OECD country after adjusting for volume and per-capita GDP differences.
- 3Rulemaking and testing
- 4- The Secretary of Health and Human Services is instructed to implement a rulemaking plan to test a payment model where Medicare would pay no more than the MFN price for certain high-cost Part B drugs/biologics. The aim is to see if paying MFN prices improves health outcomes and reduces costs.
- 5Scope and implementation
- 6- The order directs a test/pilot approach (rulemaking and testing) rather than an immediate, nationwide price change. Any changes would be implemented in a manner consistent with law and available appropriations.
- 7Legal framework and limitations
- 8- The order does not remove or alter existing agency authorities, nor does it create enforceable rights. It must operate within current law and budget constraints.
- 9Context and rationale
- 10- Cites high U.S. prescription drug costs relative to other developed nations, the COVID-19 pandemic’s impact on seniors, and the desire to reduce the burden on Medicare beneficiaries and taxpayers.