Donald Trump’s executive order to align U.S. drug prices with global benchmarks could slash prescription costs by up to 80% while pharmaceutical stocks tumble worldwide.
At a Glance
- Trump plans to sign an executive order on May 12 implementing a “Most Favored Nation’s Policy” for prescription drugs
- The order aims to reduce U.S. drug prices by 30-80% by matching the lowest international prices
- Bill Ackman, CEO of Pershing Square, praised Trump as the “first president in history to rectify the situation”
- Pharmaceutical stocks fell sharply globally following Trump’s announcement
- The policy addresses the longstanding issue of Americans paying significantly more for medications than people in other countries
Trump’s Landmark Drug Pricing Initiative
Former President Donald Trump announced plans to sign an executive order on May 12 that would dramatically reduce prescription drug prices in the United States. The order would implement a “Most Favored Nation’s Policy” designed to ensure Americans no longer pay more for the same medications than consumers in other countries. This policy could potentially cut U.S. drug prices by 30% to 80%, addressing a longstanding economic burden on American consumers.
The initiative comes as the national debt has reached $37 trillion, with healthcare costs representing a significant portion of government spending. Trump’s approach targets what many consider an unfair pricing system where Americans effectively subsidize lower drug prices around the world. The policy would require pharmaceutical companies to offer drugs to U.S. consumers at the lowest price available internationally.
Billionaire Ackman’s Influence and Support
Bill Ackman, CEO of Pershing Square Capital Management, has emerged as a vocal supporter of Trump’s drug pricing initiative. Ackman had previously suggested making it illegal for pharmaceutical companies to sell drugs abroad at lower prices than in the United States. This approach, he argued, would force a globally negotiated price that benefits American consumers while still supporting pharmaceutical research and development.
“The best way to reduce drug prices in the US is to make it illegal for drug companies to sell the same drugs abroad for lower prices than they sell them for here. This will force a globally negotiated price that will be lower than the prices that US consumers pay now and higher than what foreigners pay now. Otherwise we are stuck with a system where American consumers subsidize drug development for the rest of the world. Ask any pharma company CEO. They will agree that the above approach will have the intended effect.” – Bill Ackman.
Upon Trump’s announcement, Ackman praised the former president, stating he “must have liked my idea” and calling him the “first president in history to rectify the situation” where Americans subsidize global drug development through higher prices. This acknowledgment highlights the convergence of business and political thinking on addressing pharmaceutical pricing disparities.
Market Reaction and Economic Impact
The announcement sent shockwaves through pharmaceutical markets worldwide. Stock prices of major pharmaceutical companies fell sharply across Europe, Asia, and India. American markets also showed volatility, with the SPDR S&P 500 ETF Trust and Invesco QQQ Trust ETF experiencing slight declines following the news, though futures for major indices were trading higher ahead of market opening.
“For many years the World has wondered why Prescription Drugs and Pharmaceuticals in the United States of America were SO MUCH HIGHER IN PRICE THAN THEY WERE IN ANY OTHER NATION, SOMETIMES BEING FIVE TO TEN TIMES MORE EXPENSIVE THAN THE SAME DRUG, MANUFACTURED IN THE EXACT SAME LABORATORY OR PLANT, BY THE SAME COMPANY??? It was always difficult to explain and very embarrassing because, in fact, there was no correct or rightful answer” – Donald Trump.
Trump has claimed the policy could save Americans “trillions of dollars” in healthcare costs over time. The economic implications extend beyond immediate consumer savings, potentially reducing government spending on programs like Medicare and Medicaid. Critics within the pharmaceutical industry may argue that price controls could limit research and development investments, while supporters counter that more affordable medication improves public health outcomes and reduces overall healthcare system burdens.
