As part of the attempts to reduce the costs of health care, former US President Donald Trump signed an executive order with the vision of reducing the cost of prescription drugs sold in the US by 30 to 80 percent. The effort uses the "Most Favored Nation" (MFN) policy with the vision of bringing American drug costs up to par with the price the lowest-income wealthy nations pay.

As Trump explained, the MFN model will see that Americans do not pay a higher price than patients in other industrialized countries for similar medication. "The United States should never pay more than the lowest price that exists internationally," he said in a press conference.

The executive order gives pharmaceutical firms a 30-day grace period to lower prices voluntarily. In case they don't, the US Department of Health and Human Services (HHS) will then adopt the MFN pricing model. The president also threatened to impose tariffs on firms that don't change their pricing models to conform to global models.

This policy builds on the trade principles outlined in the General Agreement on Tariffs and Trade (GATT) of 1994, under which World Trade Organization (WTO) members are required to treat each other equally. While GATT typically refers to tariffs and trade practices, Trump has applied the MFN concept to drug pricing, aiming to eliminate what he views as systemic overcharging in the US.

For instance, if a medication is priced at INR 1,000 (about US$11.71) in India, it would not be acceptable if the same medication is being sold at an overstated price in the US. It could have substantial effects on nations like India, which are heavily involved in the worldwide supply chain of the pharmaceuticals sector.

India, the world’s third-largest producer of pharmaceuticals by volume, is a key supplier to the US, accounting for nearly one-third of all drug imports. In the fiscal year 2024–25, Indian pharmaceutical exports to the US rose by 16 percent, reaching around US$9 billion, according to the Pharmaceuticals Export Promotion Council (Pharmexcil).

Experts predict that to offset possible losses of revenue in the US, pharmaceutical companies might opt to increase prices in new markets such as India. This would be echoed on prices of some drugs that are widely prescribed, including Terbinafine hydrochloride, which is an antifungal medication widely manufactured in India and exported worldwide.

As the MFN policy unfolds, stakeholders across the pharmaceutical value chain—governments, manufacturers, and patients alike—will be watching closely to see how this unprecedented pricing reform reshapes international drug markets.