President Trump’s proposal to cut prescription drug prices by 30-80% has sent shockwaves through the pharmaceutical industry, causing a temporary dip in drugmakers’ stocks. The plan involves Health Secretary Robert Kennedy setting price targets, initiating negotiations to lower prices within 30 days, and potentially enforcing a “most favoured nation” pricing model. This model would limit US drug prices to the lowest rates paid by other wealthy countries, with expected price cuts ranging from 59% to 90%.

Unlike previous attempts, this new policy targets not only Medicare but also Medicaid and treatments covered by private health insurance. The executive order lacks detailed information on its impact, particularly on Americans with private insurance, but aims to put pressure on pharmacy benefit managers and promote selling drugs directly to patients.

The pharmaceutical industry, represented by PhRMA, is expected to resist the proposed changes, warning of potential negative impacts on investments in America. Analysts predict European and US drug companies could face profit declines if “most favoured nation” prices are implemented.

Internationally, drug pricing varies significantly, with governments negotiating directly with pharmaceutical companies to determine prices. Notably, drug prices in the US are substantially higher than in other countries, with the US being a lucrative market for drugmakers.

While Trump’s order may not derail big pharma companies’ investment plans, it remains to be seen how the industry will navigate these potential changes and maintain profitability amid increasing scrutiny on drug pricing practices.