US health authorities to set targets for lowering drug prices

The US Department of Health and Human Services said on Tuesday it would set drug prices pegged to the lowest level paid by other high-income countries following an executive order from President Donald Trump last week aimed at lowering the prices of branded medicines for US consumers.

HHS wants to implement so-called most-favored-nation pricing under which US prescription drug prices would drop to the lowest possible price paid by countries that are members of the Organisation for Economic Co-operation and Development, which includes most of the world's largest economies.

The targets would aim for prices paid by the OECD nations that have a gross domestic product per capita of at least 60 percent of US per-capita GDP, the department said.

Trump is seeking cuts between 59 percent and 90 percent to prescription drug prices. Wall Street analysts said the announcement included few details, while legal experts have said the order would be difficult to implement and likely to face legal challenges.

BMO Capital Markets analyst Evan Seigerman said implementation of a most-favored-nation pricing policy was unlikely. This is "more a strategic negotiating tactic by President Trump to push for higher international prices... rather than a true desire to pressure US pharma profits," he said.

Drug company shares have been under pressure all year due to concerns that White House policies could change their financial outlook. The SPDR S&P Pharmaceutical exchange-traded fund XPH.P is down nearly 5 percent so far in 2025, compared with a mild gain for the broader S&P 500 .SPX.

"To lower medicine prices for Americans, policymakers must address the real reasons we pay more: middlemen inflating prices and foreign countries not paying their fair share," a spokesperson for the industry trade group Pharmaceutical Research and Manufacturers of America (PhRMA) said.

Trump tried in his first term to bring drug prices in the United States in line with other countries but was blocked by courts. At the time, his administration also pushed for prices to fall to levels similar to the lowest price paid by any OECD nation with a comparable per-capita GDP.

The US pays by far the most for prescription medicines, often nearly three times more than those in other developed nations. It also invests heavily in pharmaceutical research and development, and drugmakers have said drastic price cuts would stifle R&D and innovation.

UPSETTING 'GLOBAL EQUILIBRIUM'

"The idea here is that within that set of fairly developed countries the US wants to be the most favored nation," said Yunan Ji, assistant professor at Georgetown's McDonough School of Business.

Ji said that usually works in a small market, but if the US tries to implement such a policy, it could change the "global equilibrium" since it is the largest prescription drug market.

"It's almost certain that drug manufacturers will have to renegotiate their contracts with other countries," she added.

If implemented, the policy could cause prices to rise in countries within the 60% cutoff like Germany and Canada, BMO's Seigerman said. Smaller OECD nations like Estonia or Costa Rica would fall short of the criteria that HHS has laid out.

US Health Secretary Robert F Kennedy Jr and Centers for Medicare and Medicaid Services Director Mehmet Oz will share their specific targets for medicine manufacturers in the coming weeks, the agency said.

"We expect pharmaceutical manufacturers to fulfill their commitment to lower prices for American patients, or we will take action to ensure they do," Kennedy said on Tuesday.

At a US Senate panel hearing on Tuesday, Kennedy said the administration is negotiating with drugmakers over the president's executive order.