Trump’s Push for Lower Drug Prices: A New Policy Direction
The Trump administration is signaling an aggressive shift to curb drug prices, reviving ideas like international reference pricing and cross-border importation while testing the limits of federal authority over a notoriously complex market. Early moves and trial balloons suggest a broader strategy: compress the gap between U.S. drug prices and those paid abroad, force transparency into opaque supply-chain rebates, and expand competitive pressure without collapsing incentives for real innovation.
Why drug prices remain high in the U.S.
For years, Americans have paid substantially more for many brand-name medications than patients in peer nations. Independent analyses continue to show the spread: RAND’s 2024 update estimated average U.S. prescription prices at roughly 2.78 times those in comparable countries, with the biggest delta in branded drugs. That reality sits behind rising out-of-pocket costs for seniors and families, even when list prices are partially buffered by insurance. RAND Corporation
Several structural features keep drug prices elevated. Patent exclusivity and regulatory data protections extend the runway for price setting on new therapies. Pharmacy benefit manager (PBM) rebates, structured as confidential discounts off list prices, can raise incentives to maintain high list prices even when net prices move. Medicare’s historical design—especially Part B’s “buy-and-bill” reimbursement and Part D’s limits on direct negotiation—has also contributed to prices that move faster than household incomes. When patients reach deductible or coinsurance tiers, they experience those high list prices directly.
What’s new in Trump’s approach to lowering drug prices
The headline change is a willingness to benchmark certain Medicare payments against prices abroad, often called a most-favored-nation (MFN) or international reference pricing concept. The administration previewed this in a 2025 executive push, echoing a 2020 version that was litigated and stalled. In practice, this ties Medicare reimbursements for select physician-administered drugs to the lowest price among wealthy countries—an attempt to flip the dynamic that has long left U.S. buyers paying the most. Industry groups are already signaling a legal fight, but the signal is clear: the White House wants to compress the spread in drug prices by using global comparators for the most expensive, competition-free therapies. Reuters+1
A second strand revives importation under Section 804 of the Food, Drug, and Cosmetic Act, letting states propose controlled Canadian import programs for certain drugs. The framework was finalized in 2020 and updated by FDA, with strict supply-chain, labeling, and safety requirements. If scaled, it aims to add competitive discipline for drugs that are identical to U.S. versions but priced lower in Canada, without compromising safety or traceability. Federal Register+2HHS.gov+2
A third strand returns to the rebate debate. Earlier rulemaking tried to redirect PBM remuneration away from retrospective, confidential rebates toward point-of-sale discounts or fixed fees. The stated goal: make patient prices at the pharmacy counter reflect real net prices, not inflated list prices. The mechanics are complicated—and litigation-prone—but the thrust is to reduce the spread between list and net, thereby lowering patient exposure to high list drug prices. HHS.gov
The landscape Trump inherits—and must navigate
Any Trump-era policy must coexist with provisions already in motion under the Inflation Reduction Act (IRA), which empowers Medicare to negotiate prices for a small but expanding set of high-spend, single-source drugs and caps insulin cost-sharing at $35 per month for Medicare enrollees. Negotiated ceiling prices start to bite in 2026; CMS has published timelines and initial negotiated prices. Whether the administration seeks to narrow, modify, or replace parts of IRA implementation, those negotiated prices will shape the baseline for future reforms and the politics around them. CMS+2KFF+2
The enduring constraint is international arithmetic: U.S. brand-name drug prices remain multiples of those abroad, driven by market exclusivity and coverage designs that diminished price sensitivity at launch. As long as that spread persists, pressure for external benchmarks, importation pilots, or expanded negotiation will remain. RAND’s comparative data—first published in 2021 and updated in 2024—continues to anchor this debate. RAND Corporation+1
What lower drug prices could mean for patients and markets
If MFN-style targets or negotiated ceilings meaningfully reduce unit prices for high-spend therapies, the most immediate winners are Medicare beneficiaries who hit coinsurance tiers tied to list or allowed amounts. Hospitals and physician practices that “buy and bill” Part B drugs would adjust to new reimbursement benchmarks; in theory, lower acquisition costs should offset tighter payment rates. The larger macro effect would be on launch pricing strategies. If manufacturers expect U.S. prices to reference OECD lows or negotiated caps, the traditional “U.S. pays more” model weakens. That could trim price growth at launch, especially for drugs without near-term generic or biosimilar competition.
On the other hand, the industry will argue that steep cuts to U.S. net prices reduce funds available for R&D and depress the expected return on risky projects, especially in oncology and rare disease. The evidence is contested. Some analyses predict modest innovation effects at current policy scopes; others warn of longer-term pipeline erosion if price compression extends across many classes. Policymakers will need to calibrate scope and exemptions—e.g., carve-outs for early-stage breakthroughs, or time-limited protections—to balance affordability with innovation.
Politics, messaging, and the road ahead
Drug prices are a kitchen-table issue. Announcing an MFN-style target or approving state importation plans communicates simplicity—“Americans shouldn’t pay more than other countries”—even if the rulemaking is anything but simple. Expect three kinds of pushback. First, legal challenges to administrative authority, especially if rules bypass Congress or conflict with existing statutes. Second, operational questions from states and wholesalers about ensuring drug integrity in importation. Third, macro-innovation warnings from drug makers, who will emphasize trial costs and failure rates.
Yet public impatience with high drug prices is real. A durable package is likely to mix three elements: targeted international benchmarking for the highest-spend, monopoly drugs; transparent patient-facing discounts that narrow the list-to-net gap at the counter; and careful coexistence with IRA negotiations rather than a whiplash repeal-and-replace. If the administration threads that needle, consumers could experience more predictable pharmacy bills and fewer headline shocks from five-figure list prices, without freezing the medical pipeline in place.
Bottom Line
The administration is steering toward tougher, more pragmatic levers to curb drug prices—international benchmarking, state-run importation pilots, and rebate reform—while triangulating around existing IRA negotiations. The strategy aims to narrow the global price gap that keeps U.S. drug prices elevated, cut patient exposure to inflated list prices, and push manufacturers toward more defensible launch pricing. Success will hinge on careful rule design, legal durability, and a credible case that affordability and innovation can co-exist. Reuters+3RAND Corporation+3Federal Register+3
Further Reading
The RAND Corporation’s 2024 international price comparison — “Prescription Drug Prices in the U.S. Are 2.78 Times Those in Other Countries”: https://www.rand.org/news/press/2024/02/01.html
FDA’s Section 804 importation program overview: https://www.fda.gov/about-fda/reports/importation-program-under-section-804-fdc-act
HHS/CMS fact sheet on negotiated prices for the initial 2026 Medicare list: https://www.cms.gov/newsroom/fact-sheets/medicare-drug-price-negotiation-program-negotiated-prices-initial-price-applicability-year-2026
Federal Register (2020) final rule enabling Canadian importation: https://www.federalregister.gov/documents/2020/10/01/2020-21522/importation-of-prescription-drugs
CRS legal sidebar on “Most-Favored-Nation” drug pricing concepts: https://www.congress.gov/crs-product/LSB11319
KFF explainer on the IRA’s drug provisions and insulin cap: https://www.kff.org/medicare/explaining-the-prescription-drug-provisions-in-the-inflation-reduction-act/
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