By Tami Luhby

(CNN) — President Donald Trump signed a sweeping executive order Monday morning that promises to crack down on “unreasonable or discriminatory” practices by foreign countries that result in Americans paying far higher costs for prescription drugs.

“Starting today, the United States will no longer subsidize the health care of foreign countries, which is what we were doing,” Trump said before signing the executive order, which he claimed could lower drug prices by as much as 90%.

Also, drugmakers must start offering US patients the lowest price paid for a drug in a peer country, known as the “Most Favored Nation” price, or face consequences, the president said. He directed the Department of Health and Human Services to come up with price targets within 30 days.

“Big Pharma will either abide by this principle voluntarily or we will use the power of the federal government to ensure that we are paying the same price as other countries to accelerate these price restrictions and reductions,” Trump said, although it’s unclear what authority he has to demand certain prices, particularly in the private market.

The executive order outlined some potential ramifications if manufacturers do not make significant progress in lowering prices, including directing HHS to craft a rule implementing the policy, allowing more drug importation into the US, and having the Food and Drug Administration modify or revoke approvals granted for drugs that maybe be “unsafe, ineffective, or improperly marketed.”

Trump’s effort to establish a “Most Favored Nation” rule for certain drugs in Medicare during his first term was quickly blocked by federal courts for procedural reasons before being rescinded by then-President Joe Biden in 2021. The new executive order goes far beyond that measure since it is not limited to Medicare nor to a certain number of drugs.

It’s also unclear what power the administration has to get involved in other countries’ drug price negotiations with US pharmaceutical companies, though Trump warned that nations that don’t lower their price demands could face higher tariffs. He particularly castigated the European Union for forcing drugmakers to provide their products at low prices, adding that in many ways, trade with Europe was “nastier” than with China.

“We’re going to tell those countries like those represented by the European Union that game is up, sorry,” Trump said. “If they want to get cute, then they don’t have to sell cars into the United States anymore.”

The directive comes as the Trump administration is also looking to impose tariffs on pharmaceutical imports, which had been exempted from such levies enacted during the president’s first term. The tariffs could exacerbate shortages of certain drugs, particularly generic medicines, and eventually raise prices, experts have warned.

Drugmakers, however, did not seem rattled by the announcement, with their stock prices generally up in the early afternoon. The Pharmaceutical Research and Manufacturers of America, the industry’s main trade association, praised Trump for coming down hard on other countries.

“The Administration is right to use trade negotiations to force foreign governments to pay their fair share for medicines. U.S. patients should not foot the bill for global innovation,” Stephen Ubl, PhRMA’s CEO, said in a statement.

But the industry also warned about instituting a “Most Favored Nation” policy in the US.

“Importing foreign prices from socialist countries would be a bad deal for American patients and workers,” Ubl said. “It would mean less treatments and cures and would jeopardize the hundreds of billions our member companies are planning to invest in America – threatening jobs, hurting our economy and making us more reliant on China for innovative medicines.”

Some industry analysts said the order was more bark than bite and was not as hard-hitting as some had feared.

“The announcement represents more of a headline risk vs. the industry sea change some had feared,” Evan Seigerman, a pharmaceutical analyst with BMO Capital Markets, wrote in a note to clients. “Overall, most-favored-nation pricing could be more rhetoric than actual implementable policy.”

The legality of “Most Favored Nation” pricing negotiation is “cloudy,” and substantive long-term pricing reform would require an act of Congress, he wrote.

Wide-ranging executive order

Americans have long paid much higher prices for many medications than patients in other countries, in large part because other governments often determine the cost. US prices across all drugs — both brand name and generics — were nearly 2.78 times as high as those in comparable countries in 2022, according to an HHS report last year. For brand drugs, the US prices were at least 3.22 times as high, even after adjusting for estimated rebates.

The executive order, which will likely be challenged in court, aims to reduce drug costs in multiple ways, some of which would get the federal government more involved in pricing. While US presidents and lawmakers have long decried that Americans pay higher drug prices than patients overseas, politicians have generally shied away from taking broad action in keeping with America’s free-market philosophy. This is particularly true for Republicans.

While Medicare gained the historic power to negotiate prices for a small number of drugs annually, Trump’s executive order will apply to a multitude of medications and to prices in the commercial market, as well as to Medicare and Medicaid. The president countered the idea that the directive amounted to “price controls” by telling reporters that the current system involves price controls because drug companies set the price.

If prices do not come down quickly, the administration will look at various policy levers that can be used to force drug costs down, a White House official told reporters Monday. The executive order calls on the Commerce Department and US trade representative to ensure other countries are not employing practices that hike prices in the US while keeping them low overseas.

The order also takes aim at pharmacy benefit managers, the so-called middlemen between manufacturers and insurers, whom Trump has castigated in the past. It calls for HHS to establish a way for patients to buy their drugs directly from manufacturers, bypassing these middlemen.

And it builds on Trump’s April executive order that called for instituting changes in Medicare’s drug price negotiation program and making it easier for states to import drugs from Canada.

It’s unclear when — and if — Americans will see lower prices.

In a Truth Social post Monday morning, Trump wrote, “Drug prices will be lowered by 59%.”

It followed a post from Sunday evening that promised, “Prescription Drug and Pharmaceutical prices will be REDUCED, almost immediately, by 30% to 80%. They will rise throughout the World in order to equalize and, for the first time in many years, bring FAIRNESS TO AMERICA! I will be instituting a MOST FAVORED NATION’S POLICY whereby the United States will pay the same price as the Nation that pays the lowest price anywhere in the World.”

This story and headline have been updated with additional developments.

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