White House raises more questions than answers in Executive Order directing Most Favored Nation drug pricing

History of MFN Pricing and the Trump Administration

This is President Trump’s second go at an MFN model for U.S. drug pricing. As discussed in our alert on the previous MFN model, the first Trump administration attempted to execute an MFN model using the Center for Medicare & Medicaid Innovation’s (CMMI) demonstration authority, but the model was never implemented. Two federal courts temporarily blocked implementation of this model: first, the United States District Court for the District of Maryland issued a temporary restraining order in Association of Community Cancer Centers v. Azar, and, second, the United States District Court for the Northern District of California issued a preliminary injunction in California Life Sciences Association v. CMS. The model was later rescinded by the Biden administration. It is unclear to what extent any forthcoming rulemaking will mirror the prior model. And the current EO follows one issued only a month ago, on April 15th (discussed here), which, among other things, directed the HHS Secretary to develop a payment model through CMMI to test methods of obtaining more value for high-cost drugs and biological products under Medicare.

Details of the MFN EO

As described in the EO and Fact Sheet, the Trump administration is issuing the EO out of concern that Americans pay more than patients in other countries for the same drugs, thereby subsidizing global pharmaceutical research and development. The administration’s stated intent for the EO is to “equalize” drug prices worldwide. As noted above, details on the initiatives outlined in the EO are limited. However, broadly speaking, the Trump administration indicates that it will proceed as follows:

• Addressing practices of foreign nations.
  • What the EO says: The EO directs the Secretary of Commerce and 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 U.S. 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.”
  • What it doesn’t say: What constitutes an “unreasonable or discriminatory” practice? How will the “fair market value” of pharmaceutical products be assessed?
  • Most OECD countries have government-funded health care systems that provide universal patient coverage for low co-payments. These systems almost always involve some form of government regulated pricing and reimbursement system or price controls for pharmaceuticals, since such publicly funded health care systems tend to substantially boost patient demand for drugs and other treatments, which are essentially free. As a result, governments hold down budgetary costs through restrictive pricing and reimbursement systems, long waiting periods, Quality Adjusted Life Year (QALY) requirements, and other forms of direct and indirect rationing. “Reference pricing” involves tying domestic drug prices to what is typically a basket of prices for the same or a similar drug in foreign countries with roughly comparable levels of GDP and economic development, although in its extreme forms it can also involve tying prices to a generic medicine that treats the same condition.

  In the past, the Office of the United States Trade Representative (USTR) has challenged foreign reference pricing and other foreign drug pricing practices on the grounds that they discriminated against U.S. innovative drugs. For example, in 1998, USTR succeeded in beating back an initiative by Japan’s Ministry of Health Labor and Welfare (MHLW) to implement reference pricing. The Trump administration may be considering comparable efforts as part of the EO to address the price setting practices of foreign nations.

• Facilitating direct-to-consumer sales.
  • What the EO says: The HHS Secretary shall, to the extent consistent with law, “facilitate direct-to-consumer purchasing programs” for products at the MFN price. Per the Fact Sheet, the HHS Secretary “will establish a mechanism through which American patients can buy their drugs directly from manufacturers” at an MFN price, “bypassing middlemen.”
  • What it doesn’t say: What authority does the HHS Secretary have to facilitate direct-to-consumer purchasing? By what means will the Secretary implement the purchasing programs? How would the direct-to-consumer purchasing program operate? What does this mean for patients with insurance coverage for the drugs available through the MFN DTC channel? Would the programs include physician-administered drugs? How will MFN prices be determined?
• Implementing MFN pricing.
  • Price targets.
    • What the EO says: Within 30 days of the EO, the HHS Secretary, in coordination with the Assistant to the President for Domestic Policy, the Administrator for the Centers for Medicare & Medicaid Services (CMS), and other relevant administration officials, is directed to “communicate most-favored-nation price targets to pharmaceutical manufacturers to bring prices for American patients in line with comparably developed nations.” If “significant progress towards most-favored-nation pricing for American patients is not delivered,” the Secretary and other officials shall take the additional actions described in the remaining six bullets below.
    • What it doesn’t say: How is the MFN target determined? While the Fact Sheet indicates that the MFN pricing efforts will apply to Medicaid as well as to Medicare, will it apply to patients with other kinds of coverage as well? Which drugs will be subject to price targets and will both Part B and Part D drugs be included? In addition, although the EO and Fact Sheet do not address MFN price efforts in the context of federal government contracts, will MFN targets be utilized in federal contract price negotiations and indexing, particularly for Federal Supply Schedule (FSS) contracts? What constitutes “significant progress” towards MFN pricing and over what time period will such progress be measured?
  • Rulemaking.
    • What the EO says: The Secretary “shall propose a rulemaking plan to impose most-favored-nation pricing.”
    • What it doesn’t say: What is the scope and timing of the potential rulemaking? Is it intended to create the direct-to-consumer program or impose MFN pricing in Medicare and Medicaid, or both? If applicable to Medicare, to what extent will any rulemaking follow the same model put forth by the first Trump administration?
    • As discussed in our previous alert, the first Trump administration attempted to implement an MFN payment model that tied reimbursement for certain Medicare Part B drugs or biological products to the lowest per capita Gross Domestic Product (GDP) adjusted price of non-US members of the Organisation for Economic Co-Operation and Development (OECD) with a GDP of at least 60 percent of the U.S. per-capita GDP for a given quarter. This standard could align with the EO’s directive for manufacturers to bring prices in line with “comparably developed nations,” but it is unclear whether it or another standard will be used.

    In the first MFN model, to determine the MFN price, CMS would have first identified a single source of international pricing data for a given drug and quarter, based on a hierarchy of data sources set forth in the Interim Final Rule establishing the model, and then selected the lowest price from countries represented in the selected data source. Thus, the included countries would have depended on the data source chosen, and the countries relied upon by Medicare could have changed from quarter to quarter and drug to drug. CMS intended to use data from two quarters prior to the quarter in which the reimbursement would be provided, to mirror the two-quarter lag in ASP reporting. It is unclear whether HHS would use these or similar methods for using available data to determine MFN prices under this current EO.

    Additional details on the provider participants and drugs subject to the model, add-on payments with respect to the MFN price, government price reporting implications, and beneficiary protections are addressed in our previous alert. As noted above, the first MFN model was never implemented.

  • Personal Use Importation under section 804(j) of the Federal Food, Drug, and Cosmetic Act (FDCA).
    • What the EO says: The Secretary shall consider certifying to Congress that importation under section 804(j) of the FDCA “will pose no additional risk to the public’s health and safety and result in a significant reduction in the cost of prescription drugs to the American consumer.” Under section 804(l), the Secretary’s certification is required before the U.S. Food and Drug Administration (FDA) may exercise its section 804(j) authority to waive importation restrictions for prescription drugs intended for personal use. In the prior Trump Administration, the HHS Secretary expressly excluded from his certification the personal importation waiver authority under section 804(j). If the current Secretary makes such certification, the EO directs FDA to issue guidance under section 804(j)(2)(B) “to describe circumstances under which waivers will be consistently granted to import prescription drugs on a case-by-case basis from developed nations with low-cost prescription drugs.” The waiver authority under section is limited to personal use importation, not commercial importation.
    • What it doesn’t say: How will HHS meet the statutory standard for certification as to public health, safety, and cost savings before FDA determines the scope an applicability of the waivers? How will FDA exercise the vast discretion provided in the statute to determine which prescription drugs will receive waivers for personal use importation and how will such importation differ from commercial importation? Will FDA limit such personal use importation to a 90-day supply, as it has done historically? Will FDA extend waivers to drugs from countries other than Canada? Which drugs or classes of drugs will be eligible for importation waivers? Presumably, the drugs would not include those drugs that are excluded from the definition of “prescription drug” under section 804(a)(3), including biologics, controlled substances, and intravenously injected and infused drugs.
  • FTC Enforcement actions.
    • What the EO says: The EO directs the Attorney General and the Federal Trade Commission (FTC) to “undertake enforcement action against any anti-competitive practices” identified in the report produced pursuant to the Trump administration’s previous Executive Order 14273 of April 15, 2025 (Lowering Drug Prices by Once Again Putting Americans First), discussed here. The prior order directed the HHS Secretary to conduct joint public listening sessions with the Department of Justice, the Department of Commerce, and the FTC, and to “issue a report with recommendations to reduce anti-competitive behavior from pharmaceutical manufacturers.” The report shall be issued within 180 days of the April 15th order.
    • What it doesn’t say: What types of anticompetitive practices will be a focus of any enforcement action? What is the timeline for any enforcement actions?
  • Review of exportation.
    • What the EO says: The Secretary of Commerce will “review and consider all necessary action regarding the export of pharmaceutical drugs or precursor material that may be fueling the global price discrimination.”
    • What it doesn’t say: What types of actions is Secretary of Commerce expected to take that would address pharmaceutical exports that may be fueling global price discrimination? How do such exports fuel global price discrimination? What is the legal authority for restricting US exports to address foreign price controls/discrimination? 
  • Review of drug approvals.
    • What the EO says: The Commissioner of Foods and Drugs will “review and potentially modify or revoke approvals” for drugs that may “be unsafe, ineffective, or improperly marketed.”
    • What it doesn’t say: Wouldn’t FDA already take action to prevent drugs that FDA determines are unsafe, ineffective, or improperly marketed? How would FDA bypass the statutory protections that generally prevent FDA from revoking approvals without appropriate due process?
  • All available action.
    • What the EO says: The heads of agencies, in coordination with the Assistant to the President for Domestic Policy, “shall take all action available” to “address global freeloading and price discrimination against American patients.”
    • What it doesn’t say: What existing sources of authority would allow such actions?

We will continue monitor for proposed rules, reports, and recommendations that seek to implement the provisions of the EO in the coming months. As always, it is important that you carefully review the EO to identify all issues relevant to your organization. If you have any questions about what these developments may mean in practice, please contact any of the authors of this update or the Hogan Lovells lawyer with whom you regularly work.

Authored by Alice Valder Curran, Samantha Marshall, Beth Halpern, David Horowitz, Beth Roberts, Ilana Kattan, Warren Maruyama, Joy Sturm, Allison Pugsley, Melissa Bianchi, James Huang, Maura Calsyn, Kathleen Peterson, and Caroline Farrington.