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Fair drug pricing requires legislation, not executive orders

During the first year of his second term, President Trump has issued 228 executive orders. That is more executive orders than every other president has issued over any four-year term. 

Executive orders are management directives to the executive branch. As such they do not carry the force of law and can be changed by the next president. This applies to the May executive order that dealt with drug pricing. Historically, legislation has been the most effective tool to address drug pricing; from the Hatch-Waxman Act of 1984 that created generic price competition to the Inflation Reduction Act of 2021 that authorized Medicare to negotiate drug prices.

Sound policy is best developed through legislation because it requires group decisions. Prior executive actions to rein in drug prices by this president and his predecessors have not fared well. 

In contrast, the Inflation Reduction Act has moved ahead, with Medicare negotiating the prices of 25 drugs for, per our calculations, an estimated $19 billion in savings. In addition, the law requires drug companies to pay a rebate to Medicare if they raise their prices for certain drugs faster than the rate of inflation. We have also calculated that Medicare has invoiced $1.4 billion in rebates to date. And, for the first time, the act applied a maximum out-of-pocket cap to Medicare prescription drug costs, meaning this year seniors will pay no more than $2,100 in 2026 for Part D-covered prescription drugs.

The historic law is lowering drug costs. It has withstood multiple legal challenges to date, and it now offers a platform for further action. President Trump should propose legislative expansions to the Inflation Reduction Act’s drug-pricing provisions. With his clout, that could result in new legislated savings in the hundreds of billions for taxpayers and patients.

Three main provisions that were left on the table in the development of the act would produce substantial savings for the government. The first is applying the Medicare negotiated prices, known as maximum fair prices, to the commercial market so that people with private insurance and those without insurance can access the same lower drug prices as Medicare.

The second would be to let Medicare negotiate prices for more drugs and give it the authority to negotiate drugs sooner if they are unaffordable.

Finally, we must extend the Medicare inflation rebate policy, limiting annual price increases on drugs to the commercial market and benchmarking the policy to 2015 prices. 

Trump’s executive order, “Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients” directed various government agencies to take actions to bring American drug prices in line with those paid by developed nations abroad. Then, on July 31, President Trump sent letters to 17 pharmaceutical manufacturers outlining the steps to bring down the prices of prescription drugs using the prices of other wealthy nations as a benchmark. Because the executive orders only apply to those without insurance, the likely savings are minimal.

In late December, the Centers for Medicare and Medicaid Innovation Center proposed two “most favored nation” demonstration models for Medicare leveraging the Medicare Inflation Rebate Program authorized under the Inflation Reduction Act.

Oversimplifying the proposals, the models would use the prices of other nations to obtain additional rebates for Medicare for certain single-source drugs; the Global Benchmark for Efficient Drug Pricing for drugs payable under Medicare Part B and Guarding US Medicare Against Rising Drug Costs for drugs covered under Medicare Part D. Both models interact with the existing Medicare inflation rebates in complicated ways operationally that will make them difficult to implement.  

The models are proposed using a set of legal authorities that are likely to be challenged in the courts. They also appear to interact with the most-favored nation deals that have resulted from the president’s letters to the drug companies in ways that allow manufacturers to escape participation and further complicate the legal standing of the demonstrations. We can, therefore, anticipate a difficult operational execution along with complicated litigation and regulatory responses will slow progress and alter the shape of the intended policy to lower drug costs.

Reining in the costs of prescription drugs has long been demanded by Americans on all sides of the political divide. The policy track record to date is clear that the only significant progress this century in advancing the goal of lowering drug prices has been through legislation in the form of the Inflation Reduction Act. 

The president is correct that drug prices are too high in this country and he should be congratulated for keeping attention on the affordability problem. American consumers pay a much greater share of the cost of innovating drugs compared to consumers in other countries.  However, the bottom line is President Trump should propose legislation and use the force of law to drive billions of prescription drug cost savings, not rely on operationally complicated demonstrations and voluntary secret agreements with drug manufacturers. 

Wendell Primus is a visiting fellow in Economic Studies at the Brookings Institution and former senior policy advisor to Speaker Nancy Pelosi. He played a central role in Medicare payment reform and the drug pricing provisions of the Inflation Reduction Act. Kristi Martin, former chief of staff to the deputy administrator in the Center for Medicare, is a director at Camber Collective.

Copyright 2026 Nexstar Media Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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