On May 12, 2025, President Donald J. Trump put pen to paper and signed an executive order titled ‘Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients.’
This executive order aims to lower the prices of branded prescription drugs for American consumers by establishing price targets that align with or are lower than those in other comparably developed nations.
The urgency of addressing the high cost of pharmaceuticals is underscored in the executive order’s opening line, highlighting that the United States—possessing less than five percent of the world’s population—accounts for approximately three-quarters of global pharmaceutical profits.
The historical context of drug pricing in the U.S. reveals a long-standing issue of international price discrimination, where Americans often pay significantly more for medications than consumers in other countries.
One of the most discussed methods of addressing this disparity is the practice of drug reimportation, particularly from Canada, which gained traction at the turn of the millennium. This momentum contributed to the enactment of President George W. Bush’s Medicare Modernization Act (MMA) in 2003, which enabled drug coverage for millions of Medicare beneficiaries.
Before the implementation of Part D under the MMA, many Medicare enrollees without retirement benefits faced substantial out-of-pocket drug expenses. This situation exacerbated the political pressure to lower prescription drug prices, prompting families across the U.S. to journey to Canada for more affordable medications, often making headlines in local news.
With the introduction of Part D, older Americans have experienced lower drug costs, a trend that continues alongside President Joseph R. Biden’s 2022 Inflation Reduction Act (IRA), which will introduce an out-of-pocket spending cap of $2000 starting in 2025, enhancing the benefits of the Medicare program.
As the landscape of prescription drug financing evolves, a new demographic is emerging: the commercially underinsured. Workers, particularly those with high-deductible insurance plans, are grappling with escalating out-of-pocket costs for medications, prompting critical questions about the pricing disparities between the U.S. and other nations.
In a 2024 RAND study utilizing 2022 data, findings revealed that the U.S. pays 4.22 times more for brand-name drugs before rebates than the average price paid in 33 comparator countries that are members of the Organisation for Economic Co-operation and Development (OECD).
Similar analyses have confirmed these pricing discrepancies, fostering a growing consensus that Americans are indeed paying significantly more for pharmaceuticals compared to their counterparts in other developed nations.
A contrasting 2024 analysis by the KFF Health System Tracker provides a broader perspective, indicating that the U.S. spends nearly double ($12,197 versus $6514) per capita on healthcare compared to other developed countries, when considering all healthcare expenditures. While post-rebate estimates show that prescription drugs and medical goods incur higher expenses in the U.S. ($1635 vs $944), it is the costs associated with inpatient and outpatient care that constitute the majority of this discrepancy, revealing that medical services dominate the overall spending differences between the U.S. and its peers.
Interestingly, while pharmaceutical manufacturers often face scrutiny, the data suggests that the most significant drivers of healthcare spending are not prescription drugs. In fact, the U.S. allocates around $4531 more per person annually to hospital and physician services, emphasizing a critical area for potential reform.
The question remains: how do we balance the need to manage drug costs while ensuring that pharmaceutical companies can maintain healthy profit margins that fund innovation? There exists a paradox in the current approach—policy statements on drug price reduction often clash with the fear that government negotiations may stifle pharmaceutical innovation.
Historically, there has been a belief that a free-market approach to drug development would incentivize innovation while simultaneously managing costs, leading to the involvement of Pharmacy Benefit Managers (PBMs) in facilitating market dynamics through formulary selections and outcomes-based access incentives.
Despite their intentions, the effectiveness of PBMs has been called into question. Evidence assessments used by other OECD nations appear to be utilized more successfully in their healthcare systems than in the United States.
Moreover, the KFF study points to another concern: the administrative costs associated with healthcare in the U.S. vastly exceed those in comparable countries, $945 versus $245 per person annually. Much of these inflated administrative costs remain obscured from taxpayers, employers, and patients.
In the midst of this complex landscape, community pharmacies find themselves ensnared between the conflicting interests of PBMs and pharmaceutical manufacturers. While they are not responsible for rising healthcare costs, community pharmacies are being pressured from both sides, implicating them in the ongoing pricing wars without any tangible solution in sight.
In response to these challenges, industry stakeholders are recognizing the need for transformation. Calls for greater transparency in drug pricing and administrative processes are gaining momentum, with both President Biden’s IRA and President Trump’s recent executive order signaling a shift toward more open negotiation practices.
As the healthcare industry grapples with these competing forces and seeks viable paths forward, the path to improved drug pricing and access for American consumers remains a crucial discussion to prioritize.
The fate of community pharmacies, the financial well-being of patients, and the broader implications for healthcare costs are at stake as this dialogue evolves.
image source from：https://www.pharmacytimes.com/view/do-we-really-pay-more-for-prescription-drugs-in-the-united-states-
