n May 2025, the United States is grappling with significant healthcare policy changes that could profoundly impact millions of Americans. On May 12, President Donald Trump signed an executive order aimed at reducing prescription drug prices, a persistent issue in the U.S. healthcare system. Simultaneously, House Republicans have proposed slashing $880 billion from Medicaid to fund $4.5 trillion in tax breaks, sparking intense debate over healthcare access for low-income individuals. These developments highlight the complex balance between addressing healthcare costs and maintaining essential services, raising critical questions about affordability and equity.
Executive Order on Prescription Drug Prices
Overview and Objectives
On May 12, 2025, President Trump signed an executive order to address the high cost of prescription drugs in the U.S., where prices often exceed those in other developed countries by nearly three times (Reuters: Trump Executive Order). The order introduces the “Most-Favored-Nation” (MFN) pricing model, which seeks to align U.S. drug prices with the lowest prices paid by comparable nations. The White House emphasizes that the U.S., despite having less than 5% of the global population, funds approximately 75% of pharmaceutical profits, a disparity the order aims to correct (White House Fact Sheet).
Key Provisions
The executive order outlines several actions to achieve its goals:
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Trade and Commerce Actions: The U.S. Trade Representative and Secretary of Commerce are directed to address foreign practices that unfairly suppress drug prices abroad, driving up U.S. costs.
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Price Targets: The administration will communicate price targets to pharmaceutical manufacturers to ensure the U.S., as the largest drug purchaser, secures favorable deals.
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Direct Purchasing: The Secretary of Health and Human Services, Robert F. Kennedy Jr., is tasked with creating a mechanism for Americans to buy drugs directly from manufacturers at MFN prices, bypassing intermediaries (Axios: Trump Drug Prices).
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Enforcement Measures: If manufacturers fail to comply, the order pledges “additional aggressive action,” though specifics remain unclear.
Historical Context
This is not Trump’s first attempt at MFN pricing. In 2020, during his first term, a similar policy targeting Medicare drugs was blocked by federal courts following lawsuits from the pharmaceutical industry and later rescinded by President Biden in 2021 (CNN Politics: Trump Executive Order). The current order is broader, extending to the commercial market, but faces similar legal and industry challenges. Experts note that the policy could be gamed through confidential rebates abroad, undermining its effectiveness (USC Schaeffer: MFN Problems).
Stakeholder Reactions
Reactions to the order are polarized:
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Patient Advocacy Groups: AARP, representing older Americans, praised the order, stating that high drug prices force seniors to skip medications (CNBC: Trump Drug Pricing).
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Pharmaceutical Industry: The Pharmaceutical Research and Manufacturers of America (PhRMA) criticized the order as a “Foreign First Pricing scheme” that could harm patients and innovation (Axios: Trump Drug Prices). However, PhRMA also commended efforts to make foreign countries pay more for drugs (CNN Politics: Trump Drug Costs).
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Experts and Analysts: Legal experts question the order’s enforceability, citing unclear legal authority (NY Times: Trump Drug Prices). Analysts like Chris Meekins from Raymond James suggest that grandiose executive actions often face successful court challenges (Axios: Trump Drug Prices).
Potential Impacts
If implemented, the order could lower drug costs for some consumers, particularly those on Medicare or in the commercial market. However, potential tariffs on pharmaceutical imports, also under consideration, could exacerbate drug shortages and raise prices (CNN Politics: Trump Drug Costs). The pharmaceutical industry warns that reduced profits could limit research and development, though White House officials argue that companies can offset losses by raising prices abroad (CNBC: Trump Drug Pricing).
|
Aspect |
Details |
|---|---|
|
Objective |
Align U.S. drug prices with those in other developed countries |
|
Key Actions |
Trade actions, price targets, direct purchasing, enforcement measures |
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Challenges |
Legal authority, industry lawsuits, potential for gaming via rebates |
|
Supporters |
AARP, patient advocacy groups |
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Opponents |
PhRMA, pharmaceutical industry |
Proposed Medicaid Cuts
Overview and Context
House Republicans have proposed cutting $880 billion from Medicaid over a decade to fund $4.5 trillion in tax breaks, as part of a broader budget plan that also includes increased military spending (NY Times: Medicaid Cuts). Medicaid, which covers nearly 80 million low-income individuals, families, seniors, and people with disabilities, is a critical component of the U.S. healthcare safety net (Center for American Progress: Medicaid Cuts).
Specific Measures
The proposal, led by the House Energy and Commerce Committee, includes several measures to achieve the $880 billion in savings:
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Work Requirements: Poor, childless adults must work 80 hours per month to maintain eligibility, with implementation delayed until January 2029.
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Increased Paperwork: States can verify income and residency more frequently, terminating coverage for non-responsive beneficiaries.
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Co-Payments: Beneficiaries above the federal poverty line (approximately $15,650 for a single person) may face co-payments up to $35 for doctor visits.
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Funding Reductions: Federal funding for states covering undocumented immigrants drops from 90% to 80%, affecting states like California and New York.
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Coverage Restrictions: Excludes coverage for expensive homeowners in nursing homes, gender-affirming care for transgender minors, ineligible immigrants, and providers offering abortion services (NY Times: Medicaid Cuts).
The Congressional Budget Office (CBO) estimates that these changes could lead to 8.6 million people becoming uninsured, with $715 billion of the savings coming from Medicaid and the Affordable Care Act (Democrats Energy Commerce: CBO Analysis).
Political Dynamics
The proposal has sparked significant controversy. Republicans, led by House Speaker Mike Johnson, argue that the cuts target “waste, fraud, and abuse” to streamline the program without reducing benefits (PBS News: Medicaid Cuts). However, Democrats and advocacy groups contend that savings of this magnitude are impossible without harming beneficiaries. The Center for American Progress estimates that the cuts could eliminate coverage for 15.9 million people (Center for American Progress: Medicaid Cuts).
Within the GOP, moderate lawmakers in swing districts oppose deep cuts, fearing political backlash, while ultraconservatives push for structural changes like per capita caps or block grants (NPR: GOP Medicaid Fight). The proposal has Trump’s endorsement and support from senators like Susan Collins and Josh Hawley, who favor work requirements.
Potential Consequences
The proposed cuts could force states to reduce eligibility, benefits, or provider payments, limiting access to care for low-income individuals, seniors, and people with disabilities. The CBO predicts that 2.3 million people could lose Medicaid coverage due to increased paperwork alone, with 600,000 losing all health insurance (NY Times: Medicaid Cuts). These changes could exacerbate health inequities, particularly for rural residents and minority groups (Center on Budget and Policy Priorities: Medicaid Cuts).
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Measure |
Impact |
|---|---|
|
Work Requirements |
May exclude non-working adults, delayed to 2029 |
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Increased Paperwork |
2.3 million could lose coverage, per CBO |
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Co-Payments |
Higher costs for beneficiaries above poverty line |
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Funding Reductions |
Affects states covering undocumented immigrants |
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Coverage Restrictions |
Limits care for specific groups and services |
Conclusion
The executive order on drug prices and the proposed Medicaid cuts represent pivotal moments in U.S. healthcare policy. The drug price initiative seeks to alleviate the financial burden of medications but faces legal and industry hurdles that may limit its impact. Meanwhile, the Medicaid cuts threaten to erode the healthcare safety net, potentially leaving millions without coverage and deepening health disparities. As these policies advance through legislative and regulatory processes, their outcomes will shape the accessibility and affordability of healthcare for Americans. Policymakers must navigate these challenges thoughtfully, balancing fiscal goals with the imperative to protect vulnerable populations.