U.S. President Trump declared on May 11 (local time) that he would sign an executive order on May 12 to immediately reduce the prices of U.S. prescription drugs and medications by 30% to 80%. He also plans to implement a “most-favored-nation policy” that would require the U.S. to pay the same drug prices as the lowest-priced country globally.

Trump justified the move by stating that U.S. prescription drug and medication prices have been higher than those in any other country for years. He argued that the high costs of pharmaceutical R&D should not be borne by the United States alone. According to him, these policies will ensure fair treatment for the U.S., and most importantly, will save the country trillions of dollars.

However, industry insiders have pointed out that a presidential executive order can only regulate drug prices under federal programs like Medicare and Medicaid, and cannot directly force pharmaceutical companies to lower prices for commercial insurers and other payers.
Public data shows that spending on these two segments—government programs and commercial payers—is roughly split 1:1. Moreover, the specific details of the executive order and related policies have yet to be disclosed.

Shares of Chinese pharmaceutical companies focusing on  innovative medicines plunged across the board at market open on May 12. BeiGene dropped more than 8%, while InventisBio, Baili Tianheng Pharmaceutical, InnoCare Pharma, and others also saw some of the steepest declines.

In reality, U.S. drug prices do rank highest in the global pricing landscape. From a market structure perspective, though generic drugs make up about 90% of the U.S. prescription drug market by volume, they contribute only around 20% of total sales revenue. In other words, innovative brand-name drugs—which account for just 10% of prescriptions—generate approximately 80% of the sales.

The reason lies in the fact that the U.S. is the only major country where innovative drug prices are set independently by pharmaceutical companies, without direct government intervention. Interest groups such as drug manufacturers, medical associations, and commercial insurance companies have collectively contributed to the high drug pricing in the U.S.

This has left the U.S. facing, on one hand, an increasingly heavy economic burden from drug costs and growing issues around equitable access, while on the other hand, becoming the world’s largest market for innovative drugs. The high returns have drawn global pharmaceutical companies to prioritize the U.S. for R&D investment and initial product launches.

Li Jingshuai, Head of Market Access at the R&D-based Pharmaceutical Association Committee (RDPAC) under the China Association of Enterprises with Foreign Investment, stated in an interview with Caixin Weekly that the U.S. market may account for over 60% of revenue and more than 70% of profits from innovative drugs.

By comparison, China’s innovative drug market accounts for just 3% of the global total. Coupled with domestic IPO financing challenges and low reimbursement ceilings, expanding overseas—especially entering the U.S. market—has become a major trend for Chinese innovative drug companies. Meanwhile, international pharmaceutical giants, facing patent cliffs, rising difficulty in new drug development, and intense global competition, are also seeking high-quality Chinese assets to strengthen their pipelines.

At present, only a handful of Chinese innovative drug companies have entered the overseas commercialization stage and achieved sales in the U.S. market. These include BeiGene’s Zanubrutinib and Tislelizumab, Legend Biotech’s Ciltacabtagene Autoleucel, Junshi Biosciences’ Toripalimab, and HUTCHMED’s Fruquintinib.

In 2024, Zanubrutinib generated $2 billion in sales in the U.S., accounting for more than half of BeiGene’s revenue during that period. Ciltacabtagene Autoleucel reached total sales of $963 million, with over 90% of those sales coming from the U.S. Fruquintinib’s overseas sales amounted to $291 million, which the company attributed to its rapid acceptance by patients in the U.S. market, as well as approvals in the European Union and Japan.

This highlights the importance of the U.S. market for the commercialization performance of these companies and products. The impact of Trump’s drug pricing policies on them will also be worth further observation.

At the same time, more Chinese innovative drug pipelines are in the process of business development (BD) for overseas expansion. For example, Hengrui Medicine has granted overseas rights for a Claudin 18.2 ADC (antibody-drug conjugate) and an Lp(a) inhibitor to Merck & Co., while Innovent Biologics has granted global rights for its DLL3 ADC to Roche. According to data from PharmaCube, in 2023, Chinese innovative drug companies received a total of ¥21.02 billion in upfront payments from project licensing deals, surpassing the total amount raised through IPOs for the first time and nearly doubling the latter.

When the U.S. drug pricing  fluctuates, both completed and potential licensing deals may also be affected by strategic adjustments from buyers. For example, in October 2022, Eli Lilly terminated the development of FCN-338, a BCL2 inhibitor licensed from Fosun Pharma. It cited the impact of the Inflation Reduction Act as the reason for its action, rendering the pipeline no longer meeting Eli Lilly’s investment criteria.

The Inflation Reduction Act is a policy introduced by the U.S. government to regulate drug prices. It was implemented in 2022, with the government starting by targeting drugs with high usage in government programs, long market availability, and consistently high prices, gradually initiating price negotiations.

Editor: Zhiyu Wang