The “Most-Favored Nation” executive order, explained for health insurance agents

On May 12, 2025, President Trump issued a much-anticipated executive order that promises to aggressively lower prescription drug costs. It grabs everyone’s attention, to be sure, but what does the order actually say? Will it withstand legal challenges? And most importantly, what will all that mean for your clients?

What does the Most-Favored-Nation executive order actually say?

Citing sources highlighting that on average, American patients often pay four times as much for brand-name drugs as their counterparts in similarly developed countries, the order directs the Department of Health and Human Services to pursue a Most-Favored-Nation pricing model for prescription drugs.

In plain English, Most-Favored Nation pricing would require that U.S. patients pay no more than the lowest price a drug is offered for in similar countries.

The order has several main components:

• The Secretary of Health and Human Services is ordered to create a program for American consumers to buy drugs directly from manufacturers at the most-favored-nation price
  
  
• Within 30 days, the Secretary of Health and Human Services is ordered to communicate Most-Favored-Nation pricing targets to drug manufacturers; the targets, of course, would be derived from manufacturer prices abroad
  
  
• If, for whatever reason, the Secretary is unable to do so, then:
  • The Secretary must propose rulemaking to impose most-favored-nation pricing
  • The government must outline a process for implementing case-by-case waivers to allow for drug imports from foreign countries
  • The government must investigate whether companies may be prosecuted for antitrust violations

There’s a lot of bark. But how much bite is there?

Will the Most-Favored-Nation model withstand legal challenges?

It’s clear, of course, that the administration has put a renewed focus on prescription drug pricing. But we’ve been down this road before.

In the president’s first term, a similar order was implemented targeting only Medicare Part B drugs.

However, pharmaceutical companies sued, and the order was struck down.

This year’s order is wider, affecting all public healthcare programs (e.g., Medicaid and Medicare). So, that may be strike one against it. Strike two? The Supreme Court’s so-called Chevron decision. In short, that decision can limit the government’s ability to impose prices on drug makers, unless and until Congress takes action.

There’s no legal strike three that we can see, but the order is deep in a pitcher’s count. However, a friendly Congress and/or Supreme Court could help bail it out.

What will the order mean for your health insurance clients?

Assuming the order does take effect as written, there are a few things to be aware of.

First, there’s no definite timeline for the program enabling consumers to buy directly from manufacturers at the most-favored-nation price. Even if and when that program does become available, it’s unlikely the cost of any drugs would count toward a client’s deductibles or out-of-pocket maximums, just like buying direct from the manufacturer wouldn’t today.

Second, the most-favored pricing would not go into effect in the very near future. The order gives the government 30 days to create and communicate target price points. If drug companies don’t opt in, the Secretary would have to propose, and then finalize rules to compel the price setting, adding at minimum, another 90 days – assuming that work has already begun on the rule. By now, we’re at least 120 days out, meaning a final rule would come out in September at the earliest. But even then, there’s no inkling of when the provisions of that rule would go into effect.

And we haven’t even accounted for any possible legal challenges.

Longer-term, and assuming that the program goes off without a hitch, drug prices for those in public programs would go down. That, in turn, would likely put some downward pressure on premiums in those markets.

However, the order does nothing to regulate prices in commercial, employer-group markets. And so, drug makers looking to make up for lost revenue may well hike their prices for commercial groups, driving those premiums even higher. We’ll be curious to see how large organizations like the U.S. Chamber of Commerce and the ERISA Industry Committee weigh in on all of this.

What now?

In short, we’ll have to wait and see. We’ll have to wait and see whether drug makers volunteer to cut prices. We’ll have to wait and see whether rulemaking becomes necessary. And, we’ll need to wait and see whether the whole concept stands up in court. We’ll keep you updated as we learn more.