This article is part of the “Trade Pills” series, a column that provides brief, periodic updates on trade and sanctions-related topics.
President Trump has signed an Executive Order on May 5, 2025, aimed at boosting domestic pharmaceutical manufacturing. This initiative is designed to streamline the approval processes for domestic manufacturing plants, making it easier and faster for these facilities to get up and run.
The FDA has been instructed to eliminate unnecessary requirements and increase fees and inspections for foreign plants, thereby encouraging more domestic production.
Additionally, the Environmental Protection Agency (EPA) is tasked with accelerating the construction of facilities for manufacturing prescription drugs and active pharmaceutical ingredients. This move is intended to ensure that the U.S. can produce essential medications domestically, reducing dependency on foreign pharmaceuticals and enhancing national security. To further facilitate this process, federal agencies must designate a single point-of-contact to coordinate permit applications, ensuring an efficient and streamlined process.
In a separate Executive Order of May 12, 2025, President Trump has taken steps to lower prescription drug prices in the U.S. and prevent foreign countries from benefiting unfairly from American pharmaceutical innovation. This order aims to align U.S. prescription drug prices with those in similar nations, ensuring that Americans are not paying disproportionately high prices for medications.
Amongst measures to ensure price transparency and establish mechanisms for Americans to buy these drugs directly from manufacturers at “Most-Favored-Nation” prices. The order also expands efforts to reduce drug prices to include Medicaid, in addition to Medicare, potentially leading to significant savings for both programs. Furthermore, the order facilitates importation programs and increases the availability of generic and biosimilar medicines, enhancing competition in the pharmaceutical market and driving down prices.
These new orders might have several consequences for the EU market. On one hand the EU might face increased competition from the U.S. pharmaceutical industry, which could benefit from streamlined regulations and faster approval processes. This could potentially lead to a shift in investment and production away from Europe.
On the other hand, the EU might be concerned about the potential compromise in quality and safety standards if the U.S. reduces inspections and regulatory requirements. Furthermore, lowering drug prices in the U.S. could reduce the revenue of pharmaceutical companies, potentially leading to decreased investment in research and development. This might also affect global pharmaceutical innovation, including in the EU, as companies may have less capital to invest in new drug development.
Finally, actions to prevent foreign countries from undercutting U.S. market prices could lead to trade disputes and increase tensions with the EU and potentially lead to retaliatory actions.
