Tangle - Will Trump's executive order reduce drug prices?

Episode Date: May 14, 2025

On Monday, President Donald Trump signed an executive order aimed at lowering prescription drug prices for U.S. citizens by establishing “most-favored-nation pricing.” The order directs the secretary of Health and Human Services (HHS) to facilitate price targets for pharmaceutical companies, tying their prices to what consumers pay in other countries. “We’ve been subsidizing other countries throughout the world,” Trump said at a White House signing ceremony on Monday, adding that “some prescription drug and pharmaceutical prices will be reduced almost immediately by 50 to 80 to 90%.”Ad-free podcasts are here!Many listeners have been asking for an ad-free version of this podcast that they could subscribe to — and we finally launched it. You can go to ReadTangle.com to sign up!You can read today's podcast⁠ ⁠⁠here⁠⁠⁠, our “Under the Radar” story ⁠here and today’s “Have a nice day” story ⁠here⁠.Take the survey: What do you think of Isaac’s take today? Let us know!Disagree? That's okay. My opinion is just one of many. Write in and let us know why, and we'll consider publishing your feedback.You can subscribe to Tangle by clicking here or drop something in our tip jar by clicking here. Our Executive Editor and Founder is Isaac Saul. Our Executive Producer is Jon Lall.This podcast was written by Isaac Saul and edited and engineered by Dewey Thomas. Music for the podcast was produced by Diet 75.Our newsletter is edited by Managing Editor Ari Weitzman, Senior Editor Will Kaback, Hunter Casperson, Kendall White, Bailey Saul, and Audrey Moorehead.  Hosted on Acast. See acast.com/privacy for more information.

From executive producer Isaac Saul, this is Tangle. Good morning, good afternoon and good evening and welcome to the Tangle podcast, the place we get views from across the political spectrum, some independent thinking and a little bit of my take. I am your host, Isaac Soll. Today is May 14th. It's my birthday, y'all. I say this every year. I'm going to use this occasion.

The very first time that I sent a newsletter and publisher podcast on my birthday. I asked that people celebrate or acknowledge my birthday by telling one or two people they knew about Tangle and becoming a member if they hadn't yet. So that was six years ago I started doing that. I'm keeping the tradition alive this year by saying, happy birthday to me. If you wanna offer a birthday gift, the best thing you can do is spread the word about Tangle

or go to retangle.com forward slash membership and become a Tangle member if you haven't yet. Also today is a far more special day than just my birthday. We sent a newsletter about this to our mailing list this morning, but we have not announced it yet on the podcast where it is honestly most relevant. We are hiring Camille Foster as editor-at-large at Tangle. If you're a regular podcast listener,

you've probably heard Camille on the show a couple of times in the last month or so, and you probably understand why we immediately tried to poach him and bring him into the Tangle umbrella. He is, I mean, really truly one of the most inquisitive, open-minded and perhaps most importantly unpredictable political thinkers in America today. I love his brain. I love how he thinks. I agree with him on a lot. I disagree with him on a lot.

He's a media pro. He's been around the industry forever. He's succeeded at pretty much everything he's done. And I was honored and humbled by the fact that he loves Tangle and love what we are building. And when I floated the idea to him about maybe joining the team, he was enthusiastic about it. So we're bringing Camille on.

He will be editor at large. He's gonna be joining the weekly podcast, the Sunday podcast with us. He's gonna be contributing written PCs to Tangle. He's gonna help shape our daily coverage across platforms. It's gonna be really fun. And relatedly, Camille, I realized when we put together the announcement for him, he's the 15th full

or part-time employee here at Tangle, which is nuts. I just have a hard time wrapping my head around that when this kind of started, but just me and internet connection and a few hundred email subscribers. But we now have 15 people who are full or part-time here at Tangle.

If you're interested in seeing who those 15 people are, there will be a link in today's episode description to the full announcement about Camille joining the team. Included in that, we pulled together staff bios for everyone on the team, which was really fun to do. And yeah, it's just an amazing crew that I'm so proud of. So proud of what we're building. So many more good things to come.

This is gonna be an amazing year. And thank you guys for all the support that has gotten us here. Your memberships, you're listening to the episode, you're just listening to advertisements. If you're a free member, they matter. They make a huge difference. They are the reason we have enough revenue to hire people like Camille to hire the other 14 people who make up the team now so thank you guys for that and uh

Without further ado. I'm gonna send it over to john for today's main story, which is on trump And some drug prices and i'll be back for my take Thanks, Isaac. And happy, happy birthday, brother. I hope you get the gift that you're asking for, which is a whole bunch of membership signups and that you have a great day, my friend. And to our amazing Tangle community, welcome everybody. Here are your quick hits for today.

First up, President Donald Trump announced a commitment by Saudi Arabia to invest $600 billion in the U.S. via a series of deals, including an approximately $142 billion defense sales agreement. Separately, President Trump said that the U.S. will lift its sanctions on Syria in order to give them a chance at greatness. Number two, Israel said it targeted Hamas's leader in Gaza, Mohammed Sinwar, in an airstrike at a hospital in the southern Gaza Strip. Sinwar's status is currently unknown.

3. A federal judge ruled that the Trump administration can use the Alien Enemies Act to deport accused Venezuelan gang members but must give potential deportees at least 21 days notice and the opportunity to challenge their removals. 4. members but must give potential deportees at least 21 days notice and the opportunity to challenge their removals. 4. The Trump administration said it is cutting an additional $450 million in grants to Harvard University, claiming that the school has failed to address the government's concerns about

race discrimination and anti-Semitic harassment on campus. 5. The Food and Drug Administration announced it will conduct a review of ingestible fluoride prescription drug products for children with the goal of removing the products from the market. ["Dreams of a New World"] The president said in his remarks today

that prescription drug prices will drop quote almost immediately. How realistic is that idea? Yeah, so he did say that the White House, they actually walked that back a little bit. They actually said we expect relief very soon and we expect the drug makers to come to the table very soon. So not exactly immediate. But there are questions on whether or not Trump will be able to get this done and whether

he has like the legal authority to do this. On Monday, President Donald Trump signed an executive order aimed at lowering prescription drug prices for US citizens by establishing most favored nation pricing. The order directs the Secretary of Health and Human Services to facilitate price targets for pharmaceutical companies, tying their prices to what consumers pay in other countries. We've been subsidizing other countries throughout the world, Trump said at a White House signing ceremony on Monday, adding that some prescription drug and pharmaceutical prices will be reduced almost immediately by 50 to 80 to 90 percent.

For context, a most favored nation policy fixes domestic prices for each consumer good to match the lowest price that good is sold for in another Organization for Economic Cooperation and Development member country. President Trump signed a similar order in 2020 implementing Most-Favored Nation pricing for prescription drugs purchased by government programs like Medicare. The order was paused following challenges in court and the Biden administration formally revoked the rule in December 2021. caused following challenges in court, and the Biden administration formally revoked the rule in December 2021. Additionally, the order also directs the Secretary of Commerce and the United States Trade Representative

to ensure that foreign nations do not engage in practices that purposefully and unfairly undercut market prices and drive price hikes in the United States. Trump said the order will apply to the commercial market as well as to public Medicare and Medicaid programs but did not specify which medications it will affect. HHS Secretary Robert F. Kennedy Jr. applauded the order, though he did not comment on when pharmaceutical companies might reduce their drug prices. I think they're ready to figure out a way to get there, and they have advantages in this executive order because we got rid of PBMs or pharmacy benefit managers,"

Kennedy said. However, some industry professionals were skeptical that the order would lead to lower consumer drug prices. We're unlikely to get the drug companies to voluntarily decrease their prices, and we're not going to get the other countries to voluntarily increase their prices, Gerard Anderson, professor of health policy and management at John Hopkins, said. President Trump's order also faces scrutiny from some Republican lawmakers. Senate Majority Leader John Thune said a similar legislative plan would be controversial, while

Senator Chuck Grassley instead expressed support for his own bill banning deceptive and unfair pricing schemes by PBMs. Today, we'll cover what the right and the left are saying about Trump's executive order, and then Isaac's tape. We'll be right back after this quick break. Alright first up, let's start with what the right is saying. The right is mixed on the order, though many call it a common sense proposal. Some say the order amounts to price controls and won't meaningfully address drug prices. Others disagree and argue the proposal supports free markets.

In the American Spectator, Scott McKay said Trump's drug price executive order should have happened decades ago. As Trump noted, practically every foreign country operates as a bulk buyer of pharmaceuticals, while the federal government in the U.S. does not. Neither Medicare nor Medicaid directly dictates drug prices for their enrollees in the way that foreign countries' health bureaucracies do, and naturally, private health care plans don't have the power to do anything of the sort, McKay wrote. What Trump is attempting to do is to play the same game those countries play to cram down drug prices.

This isn't an assault on the free market. There is no free market in prescription drugs. Since World War II, it's been a cartel market, and it's simply been the American people getting hammered by it. And we see this argument from the status quo crowd again and again. Trump or MAGA or NatCon or whoever are attacking the free market. We get this on trade again and again. Free markets are a great thing, but with respect to pharmaceuticals,

Americans have been forced to subsidize drugs for the rest of the world for decades, and it's been left to the Bernie Sanders' of the world to complain about it, while the rest of us are supposed to grin and bear it, while Germans and Canadians get the same pills for a tiny fraction of what Ohioans and Arizonans pay," McKay said. The prescription drug market in the United States is worth $400 billion per year, and we are being grossly overcharged compared to the rest of the world. Cramming down those prices

and resettling the global pharmaceutical market, while at the same time instituting some real reforms which de-cartelize the market, is an idea whose time should have come a long time ago. In Cato, Michael F. Cannon criticized Trump's price controls. Trump's price controls. Trump's executive order is a laundry list of coercive actions he plans to take against drug companies that do not make significant progress towards his price targets.

HHS does not have the power to impose price controls on private pharmaceutical purchases. If it did, some past administration already would have exercised that authority, Cannon wrote. But Trump might be able to impose price controls even without statutory authority. Congress has granted the executive branch so much power already and so much discretion in the use of those powers that the president may be able to claim this power that Congress never granted. What drug manufacturer would risk having HHS, DOJ, the FTC, Commerce, the FDA, and other federal

agencies simultaneously taking action against them. If Trump wants to reduce drug prices, there are several steps he can take and steps that he should push Congress to take. Price controls are never the answer," Cannon said. If Trump were serious about reducing drug prices, for example, he could unilaterally implement what I recommended late last year. The administration should expand Executive Order 13938 from July 2020 by directing the Secretary to finalize a regulation that waives the prohibition on re-importation of all classes

of drugs and devices from all organizations for economic cooperation and development member nations. That one measure would reduce the trade barrier that enables the very price discrimination that vexes Trump. In USA Today, Dase Poteis argued Trump's move to lower drug prices takes right approach. Trump's suggestions are warmly welcome compared with the policies that many were bracing for over the weekend. When news came out that Trump was looking to attack prescription drug

prices, I was nervous that the policy would come in the form of socialist price controls," Poteis wrote. Price controls artificially reduce the incentive for companies to create a certain product, which inevitably leads to shortages. In the case of drugs, these shortages come in two forms, the actual supply of existing drugs and the research for innovations. Drug companies have lobbied against market-based approaches that eat into their bottom line, including lifting import restrictions and reforming drug patents. Trump claims he is a man who cannot be bought and, if true, that makes him a perfect vessel

to usher in policies that drug companies hate, POTUS said. In addition to opening up drug imports, the Trump administration should look to other free market solutions to bring down drug prices. More competition rather than less would be a great place to explore. Cutting red tape, lifting import restrictions, and examining the terms of drug patents

could also bring drug costs more in line with those of other nations over the long term. Alright that is it for what the right is saying, which brings us to what the left is saying. The left is mixed on the order, though many say it will not achieve what Trump hopes. Some say the order is an encouraging first step but runs significant risks. Others suggest the action could actually lead to higher medication costs in the long run. In MSNBC, Emma Freer said, Trump's order on drug prices isn't what it seems. Trump is right that drug prices are too high.

A January 2024 RAND study found that we pay nearly three times as much for prescriptions as other high-income countries. Trump is also right that Big Pharma plays a big role in this crisis. Manufacturers game the patent process for brand-name drugs to keep prices high and block more affordable, generic, and biosimilar options from coming to market, Freer said. But there is no way to lower drug costs for American patients without costing Big Pharma, whose executives can afford patio dinners at Mar-a-Lago and hefty donations to Trump's inauguration fund.

So Trump's order, so vaguely worded that it's not clear if the rules would only apply to federal programs like Medicare and Medicaid or, more broadly, to commercial plans, ignores the greed inflating American pharmaceutical prices. His order, for example, has just about nothing to say about the role of pharmacy benefit managers, Freer said. Additionally, Trump's order assumes Big Pharma won't just choose to raise prices charged outside the U.S., bringing them more in line with the inflated prices we pay. It also assumes that Trump has the power to do all this, a very big if. Trump issued a similar executive order during his first term, but a federal judge blocked

it for procedural reasons. The Bloomberg editorial board wrote about how to cut U.S. drug prices without hurting innovation. Policymakers have spent decades trying to lower drug prices. Most have sought incremental reforms that fail to address the root of the problem. Thanks to an accident of history, most Americans get health insurance from their employers, not the government. As a result, the U.S. is the only developed nation that doesn't negotiate drug prices

directly. Worried that a large government buyer would suppress innovation, Congress banned Medicare from bargaining over drug prices in 2003, the board said. To be clear, that concern was well-founded. High drug prices are one reason the U.S. has become a global leader in medical innovation. Yet the lack of a single government buyer has created two main problems. First, a web of middlemen has emerged to haggle on employers' behalf. Second, negotiations between these middlemen and the industry have created multiple discount prices,

which are guarded as confidential, the board wrote. The White House wants to use prices negotiated in other rich countries as a reference point. So-called most favored nation pricing would prevent the drug industry from charging the U.S. any more than the lowest of these prices. The potential benefits of MFN are twofold. Not only would it tend to lower U.S. prices,

but it would also help shift the cost of innovation by raising prices in other nations, all while moving toward a single transparent number. Of course, such a strategy could backfire. For particular drugs, prices might shift in unforeseen ways, and not necessarily to the U.S.'s advantage. In his TFN newsletter, Jonathan Larson argued Trump's order lowering drug prices raises drug prices.

Out of some weird notion of fairness, Trump is pegging the cost of drugs here to the cost of drugs in Europe, never mind the disparity in pharmaceutical executive compensation. In Trump's framing and big pharmas, American consumers are subsidizing low European prices. Here's how they figure that, and there is a certain capitalist logic to it, Larsen said. Pharmaceutical companies will only do whatever research, innovation they can profit off of.

Big Pharma gets you to subsidize research via the federal government, which they then cherry pick for the most profitable market winners. It's worth noting that no one is forcing drug companies to charge low prices in Europe, even if Trump does call it a scheme, which is how you badmouth negotiating tactics you can't or don't want to use. If drug companies didn't want to discount their products and weren't still making money

off it, they'd just stop selling drugs there, Larson wrote. But instead of doing what Europe does, you know, negotiate better, Trump wants to preserve big pharma profits and just source them more evenly. But Trump's proposed system only works to Americans' benefit if European prices remain low, which they won't if Trump's order is carried out. All right, let's head over to Isaac for his take. All right, that is it for the left and the right are saying, which brings us to my take. So before getting to my policy analysis of the order, I want to call out the fascinating political dynamics at play.

Fixing drug prices, quite obviously, is a policy proposal you would expect to come from the left. Toward the end of Biden's term, it was a policy put forward by the left, and the commentary around it was robust. The ideological whiplash has caught many partisans off guard, and a seemingly infinite number of conservative pro-Trump influencers have done a complete 180 on this kind of policy prescription now that Trump is the one proposing it. The whiplash is hitting liberal partisans, too. This is a note I got from Will K. Back, our senior editor this morning, who often researches the political commentary every day.

He said, quote, Disappointingly, not many writers on the left have weighed in yet. Hard to understand why, as the drug pricing topic drove a ton of commentary toward the end of Biden's term and the left was all over it. As I've looked through the opinion pages for left-leaning outlets this past week, there seems to be a new level of audience capture on display, just a total blanketing of Trump-bashing commentary and very little thoughtful consideration of issues like this. In other words, partisans on both sides are having a hard time choosing between defending their ideology and expressing their opinion of the president. Though it's easy to empathize with that disorientation, it can be difficult for any of us to find

our footing when Bernie Sanders, arguably the avatar for the modern left, is advocating for legislation to further the executive agenda of Donald Trump. As for my policy analysis, I think both of these things can be true. First, the Trump administration is identifying a very real problem and using most favored nation pricing is not an unreasonable way to address it. And number two, I'm really unsure what the practical outcome of this will be. The White House is right that the US consumer generally pays more than three times as much

for these drugs as citizens of other OECD countries. It's also correct to say that we effectively bankroll pharmaceutical research, development, and innovation for the rest of the globe. The pros of this arrangement are obvious. The US market is the first to get incredible new breakthrough treatments, and we fund all kinds of jobs and research here in the US.

The downside is what happens on the other end. American consumers bankroll that system, resulting in higher prices than the rest of the world pays. I am compelled by arguments like the one by Scott McKay under what the right is saying, in which he convincingly makes the point that we already don't have a free market for drug prices. Trump basically is trying to play the same game other countries are already playing, which is help keep their prices down.

And here in the US, opaque negotiations over these prices allow pharmaceutical companies to distort free market dynamics in ways that benefit the corporations and crush American consumers. That leads me to the practical outcomes of Trump's order. When President Biden allowed Medicare to negotiate prices for some of the drugs it covers, I laid out the many ways it could fail. It applied to a narrow scope of drugs, it didn't address the role of pharmacy benefit managers or PBMs, and drug providers would find ways to make up lost revenue, such as simply raising prices in other countries. The first round of negotiations seemed to bear fruit, but the jury is still out on the

policy approach as a whole. Trump's order applies to more than just Medicare drug prices and produces many of the same questions and more. For instance, what constitutes a drug manufacturer making voluntary significant progress on reducing their prices? How much will pharmaceutical companies have to reduce their prices

toward most favored nation targets to avoid the government instituting a rule-making procedure to ensure that they do so? And what would such an enforcement process even look like? Also, since the order doesn't mention PBMs by name, how can Trump say that it cuts out the middlemen? The answer to that question is at least a little more clear. Section 4 of the order directs the health secretary to facilitate direct-to-consumer

purchasing programs for pharmaceutical manufacturers that sell their products to American patients at the most favored nation price. That's at least enough to spook the industry as shares of companies that operate PBMs sank on Monday. Health experts and pharmaceutical companies have long complained about the role of PBMs in driving up costs. And if Trump's order is able to target them effectively,

it would bring the US more in line with pure countries. Of course, as with the rest of the order, Secretary Kennedy's enforcement options are entirely unclear. And, perhaps most importantly, there's the same question that applies to many of Trump's other executive orders. Can he even do this? A similar order was indefinitely paused during Trump's first term, and the pharmaceutical and PBM industry has a powerful lobbying arm which could compel a wave of lawsuits and snap Congress into slowing Trump down. I have two final points, one personal and one a broader note about the policy.

First, I'm generally a believer in the power of free markets and I'm concerned about the impact this policy will have on innovation and research here in the US. But as I said above, we already don't have a free market and drug pricing, so I'm open to the government taking sensible action to address our ridiculous drug prices. And number two, plenty of experts are warning that similar policies have been tried and failed throughout American history and could lead to critical drug shortages, which is another convincing point I can't quite shake. So as much as I believe Trump is aiming at the right target, it'd be foolish to pretend

there isn't any risk in taking this shot. We'll be right back after this quick break. All right, that is it for my take, which brings us to your questions answered. This one is from Laura in Michigan. Laura said, a question I think many people have, where do the tariffs the government is collecting go exactly? I'm assuming into the treasury, but what's the plan to spend all this extra money? Will it just go into the general budget planning or be earmarked for something else?

So yes, all of the tariffs the government collects go to the Treasury Department. As with other tax revenues, tariffs are deposited into the Treasury's general affairs budget, which finances employee salaries, infrastructure maintenance, and government goods and services. From there, it can be used for essentially anything, according to Felix Tintelnot, an associate professor of economics at Duke University. Tariff revenues rose 14% from February to March, $7.68 billion to $8.75 billion, and then nearly doubled in April to an all-time high of $16.3 billion. And since the revenue the Treasury reports has a one-month lag. That number likely does not include much of the revenue collected from tariffs on China, a figure that became as steep as 145 percent, and though it has come down to 30 percent, is still historically high.

That's all to say that the Treasury Department is indeed collecting more money from tariffs, is still collecting that money, and is set to collect even more. However, it's not exactly extra money. The federal government is still running a spending deficit of over $1 trillion so far this fiscal year. And although the government is collecting significantly more tax revenue through tariffs, that revenue won't correct the imbalance by itself.

If the Trump administration were able to cut enough spending and raise enough revenue to record a budget surplus, they would likely do what the Clinton administration did the last time the government ran a surplus from 1998 to 2001, put it towards decreasing our national debt. All right, that is it for your questions answered. I'm going to send it back to John for the rest of the pod. Don't forget, if you want to give me a birthday gift, become a member to Tangle or just share

this podcast with somebody you know and love. And we'll see you guys tomorrow. Have a good one. Peace. Thanks, Isaac. Here's your Under the Radar story for today, folks. As the United States and Canada seek a new trade deal, the future of a 60-year-old treaty that governs water allocations from the Columbia River is also in question.

The river runs from British Columbia through Montana, Idaho, Washington, and Oregon, providing the single largest source of hydropower in the United States. Parts of the existing treaty expired shortly before the 2024 presidential election, and negotiations broke down after President Trump took office and began suggesting Canada should become the 51st U.S. state. If a new agreement is not reached, U.S. hydropower production could become less predictable, according to a recent nonpartisan congressional report. A spokesman for British Columbia said there has been no movement in negotiations since

the U.S. State Department paused the discussions as part of a broad review of international commitments. The New York Times has this story, and there's a link in today's episode description. Alright, next up is our numbers section. The estimated total of prescription drug spending worldwide in 2022 was $989 billion. The percentage of total prescription drug spending in 2022 accounted for by the United States was 62%. The percentage of U.S. prescription drug volume accounted for by unbranded generic drugs in 2022 was 90%, according to a 2024 Rand study.

The percentage of total U.S. prescription drug spending accounted for by unbranded generic drugs in 2022 was 8%. The percentage of US prescription drug volume accounted for by brand-name originator drugs in 2022 was 7%. The percentage total of US prescription drug spending accounted for by brand-name originator drugs in 2022 was 87%. by brand-name originator drugs in 2022 was 87%. The average cost multiplier paid at the retail level by consumers and other payers in the United States for 20 selected brand-name prescription drugs compared to buyers in Australia, Canada, and France was two to four times, according to a 2021 U.S. Government Accounting Office report. The percentage of U.S. adults who say they are taking at least one prescription medication is 61 percent, according to a July 2023 KFF poll. The percentage of U.S. adults who say there is not as much government regulation as there

should be to limit the price of prescription drugs is 73 percent. And the percentage of Democrats, independents, and Republicans, respectively, who say there is not as much government regulation as there should be to limit the price of prescription drugs is 82%, 67%, and 68%. And last but not least, our Have a Nice Day story. Rising Star pitcher for the Seattle Mariners and animal lever Andres Muñoz partnered with Seattle area feline rescue to put together an experience package to auction off for funds. The package includes passes to batting practice, game tickets, and a meet and greet with Muñoz. The pitcher's love of animals comes from his 14-year-old Persian rescue cat Matilda,

who regularly goes on Mariners road trips. Pets give you a lot of happiness, Munoz said. That is why it's really important for me. Seattle Times has this story and there's a link in today's episode description. Alright everybody, that is it for today's episode. As always, if you'd like to support our work, please go to retangle.com where you can sign up for a newsletter membership, podcast membership, or a bundled membership

that gets you a discount on both. We'll be right back here tomorrow. For Isaac and the rest of the crew, this is John Law signing off. Have a great day, y'all. Peace. Our executive editor and founder is me, Isaac Saul, and our executive producer is John Law. Today's episode was Editive and Engineer by Dewey Thomas. Our editorial

staff is led by managing editor Ari Weitzman with senior editor Will K. Back and associate editors Hunter Kaspersen, Audrey Moorhead, Bailey Sall, Lindsay Knuth, and Kendall White. Music for the podcast was produced by Dyett75. To learn more about Tangle and to sign up for a membership, please visit our website at retangle.com.