Trump's Healthcare Order: 2nd Time's the Charm?

May 19th, 2025

Arnav Goyal

Around a week ago, President Trump declared that “My next TRUTH will be one of the most important and impactful I have ever issued.” A day later, he posted that he would start to implement some radical changes in the healthcare industry. He implemented a policy from his first administration: a most-favored-nation-clause on healthcare products. This basically just means that the administration pegs prices Medicare pays for certain drugs to an “international reference price.” That basically would have been based on the lowest price paid for the same medicine by other wealthy nations. However, how does this work? What are the implications of it, and can it go further than his first ambition? Let me explain.

For context, Trump tried to implement this policy all the way back during 2020, with Medicare Part B drugs. This policy seemed good at the offset, as the pandemic was only ballooning costs for many Americans’ healthcare bills. However, 3 things happened that led to the demise of this policy in 2020.

Legal challenges ultimately engulfed the policy due to threats from the pharmaceutical industry having less money for R&D
At a time when COVID vaccine research was going lightning fast, this EO threatened to scale back a lot of pharmaceutical companies’ funding, hence the questions on the legality
This didn’t let Medicare directly negotiate prices with the pharmaceutical companies, and in essence gave no share of R&D to the country in which the HHS is invoking the most-favored-nation-clause.

However, in the end, the plan ultimately failed to deliver on much action, and soon after Biden’s administration took office, they scrapped the plan.

Yet, Trump wants to give the policy a second thought, but this time, he may actually have a shot at successfully implementing this. How though? It’s simple. Trump appointed many loyalists at the HHS such as RFK Jr., which leads to higher rates of fast tracking for his policies. His intention is to deliver a seismic shift to the Healthcare industry. In his Truth, Trump said “...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!” This entire argument on the most favored nation clause banks upon the fact that there is an assumption that America is being ripped off by drug companies, and that Americans must bear the brunt of it.

This argument about the most favored nations clause can very well have adverse impacts on the healthcare industry. Some have argued that many pharmaceutical companies can make loopholes and pull out of countries with cheaper prices to those slightly lower than the United States, so that their profits can remain high. Moreover, some say that it could cripple biotech companies. Nonetheless, some remain cautiously optimistic, albeit also confused by the prospects. However, one consensus is clear: the healthcare industry will fight back against this proposed deal. We already saw this with the Medicare negotiations that the Biden administration used during their administration. They may argue that reducing middlemen could be more useful rather than implementing this policy, which could harm their profits while also harming R&D.

Overall, the implications of this policy could be twofold. Most companies could absorb the impact, like the tariffs, however, have to pay the brunt of the cost, and could pass it to international consumers as well. However, another plausible scenario is that we could very well see the costs staying the same, and many pharmaceutical companies bowing out of markets just to ensure that they can keep the costs for the drugs slightly lower or the same. Only time can tell what happens.

Extemp question: What will be the implications of a “most-favored-nation-clause” drug policy on drug prices across the world?