White House officials said the government will give drugmakers price targets in the next 30 days, and will take further action to lower prices if those companies do not make “significant progress” towards those goals within six months of the order being signed.
Investors were skeptical about the order’s implementation, and shares, which had been down overnight on the threat of “most favored nation” pricing recovered and rose in early morning trade on Monday.
Shares of major drugmakers, after initially falling during premarket trading, rallied on Monday, despite the wide-ranging order. Shares of Merck rose 4.3%, while Pfizer gained 2.7% and Gilead Sciences rose 4.7%. Eli Lilly, the world’s largest drugmaker by market value, was marginally lower.
The executive order differed from what drugmakers had been expecting. Four lobbyist sources told Reuters they were expecting an executive order that called for “most favored nation” pricing on a subset of Medicare drugs.
“Implementing something like this is pretty challenging. He tried to do this before and it was stopped by the courts,” said Evan Seigerman, analyst at BMO Capital Markets. The United States pays the highest prices for prescription drugs, often nearly three times more than other developed nations. Trump tried in his first term to bring the United States in line with other countries but was blocked by the courts. If drugmakers do not meet the government’s expectations, it will use rulemaking to bring drug prices to international levels and consider a range of other measures, including importing medicines from other developed nations and implementing export restrictions, a copy of the order showed.
The order also directs the U.S. Federal Trade Commission to consider aggressive enforcement against what the government calls anti-competitive practices by drugmakers.
“We’re all familiar with some of the places where pharmaceutical companies push the limits to prevent competition that would lower their prices,” one White House official said, pointing to patent protections and deals drugmakers make with generic companies to hold off on cheaper copies.
The FTC has a long history of antitrust enforcement actions against pharmaceutical and other healthcare companies. The agency sues to block mergers that it believes would harm competition and challenges anticompetitive agreements between rivals.
A spokesperson for the commission did not immediately return a request for comment.
Trump said on social media on Monday that drug prices would be cut by 59%. The estimate followed comments he made on Sunday that he would sign the order pursuing “most favored nation” pricing, resulting in cuts of 30% to 80%.
The White House officials did not specify any targets.
Trump’s order also directs the government to consider facilitating direct-to-consumer purchasing programs that would sell drugs at the prices other countries pay.