After five straight years of generationally high inflation, Americans are hunting for a new villain to blame for the march of prices. There are a few repeat offenders in the eyes of working people — landlords, restaurant chains, and grocery stores, to name a few. But some industries have reached supervillain status — healthcare is perhaps chief among them.

There’s a lot to dislike about America’s healthcare system, which spends more than any other industrialized nation and gets inferior outcomes. However, fixing it is more complex than it looks, especially with so many parties to square the blame with. Politicians often look for simple, convenient targets — and in the highly profitable pharmaceutical space, they’ve found one.

Trump’s gambit: According to IQVIA, Americans spent $98B out of pocket on drugs in 2024; not exactly pocket change. That might explain why 82% of people polled in a KFF study say that prescription drug costs are unreasonable. It’s rare to find so much consensus among Americans, and where there’s agreement, action usually follows. In 2022, Democrats passed the Inflation Reduction Act, which allowed the government to negotiate prices on top-selling drugs. Now, Republican President Donald Trump is looking to make his own mark on drug pricing — but he’s less willing to negotiate. After signing an executive order in April targeting drug negotiations, discounts, and imports, the President is back with a bigger order.

• On Sunday, he posted that he would sign an executive order that would make it so that the US pays “the same price as the nation that pays the lowest price” for pharmaceutical drugs.
• Trump says that the policy is meant to align prices across global economies and “bring fairness to America” — promising price cuts of 30% to 80% “almost immediately.”

Solving the Sickness

Americans are widely seen as subsidizing global drug costs — paying more for prescriptions than people in other countries, many of whom earn less and have state-sponsored healthcare systems that negotiate rates and buy in bulk. Trump’s “most favored nations” policy attempts to bring those prices to the US by tying drug costs to the lowest negotiated rate worldwide. But the policy might have unintended side effects.

• Industry groups, which sounded off about the Democrats’ drug negotiation bill, warn that the policy could affect R&D spending meant to spur drug discovery and curtail planned investment in the US.
• Still, that could be a deflection, as FactSet data shows pharma and biotech firms posted a 124% and 71% year-over-year earnings increase — with several major players swinging from large losses to profits.

What’s the damage? Pharma firms will now have 30 days to engage with the government to set prices, or face the threat of “additional action” from the White House, including targeted company-specific tariffs. Surprisingly, the market didn’t panic. The SPDR S&P Biotech ETFXBI

and iShares Biotechnology ETFIBB

escaped largely unscathed, jumping 4% on the news, thanks to positive developments in the trade negotiations between China and the US — though declines were originally slated.