Introduction

The U.S. prescription drug pricing system is a complex, interconnected web where pharmaceutical manufacturers, intermediaries, regulators, and international trade dynamics drive costs that are more than three times higher than in other OECD nations, as noted in the White House fact sheet accompanying President Donald J. Trump’s Executive Order (May 12, 2025). This disparity, where the U.S. funds roughly 75% of global pharmaceutical profits despite comprising less than 5% of the world’s population, reflects a system shaped by reinforcing feedback loops, nonlinear pricing mechanisms, and delays that perpetuate inefficiencies. To achieve a 30–80% reduction in drug prices while enhancing patient access and continued innovation a systems dynamics approach to lowering drug prices is essential—one that identifies leverage points, addresses feedback mechanisms, and anticipates nonlinear outcomes. This article leverages the Executive Order and systems theory to propose structural interventions that offer a comprehensive path toward reform.

Key System Dynamics Driving U.S. Drug Pricing

Drug pricing operates as a complex system with multiple components influenced by feedback loops, nonlinear behaviors, and delays. Highlighting and understanding these factors are key to a systems dynamics approach to lowering drug prices:

1. Pharmaceutical Manufacturers: Set list prices based on research and development (R&D) costs, market dynamics, and profit expectations. A reinforcing feedback loop drives price increases: high U.S. prices fund global R&D, enabling manufacturers to charge even higher prices to sustain profits, as the U.S. subsidizes 75% of global pharmaceutical profits (White House, 2025).
2. Intermediaries: Pharmacy benefit managers (PBMs), wholesalers, and pharmacies add costs through rebates and markups. A balancing feedback loop exists where PBMs negotiate discounts to lower costs, but their retention of rebates creates a nonlinear effect, inflating net prices unpredictably (Trish et al., 2021).
3. Regulatory Frameworks: FDA approvals, patents, and exclusivity periods delay generic competition, reinforcing high prices. System delays in generic approvals (often 7–12 years due to patents) sustain monopolistic pricing.
4. International Dynamics: Foreign nations secure lower prices, forcing U.S. consumers to subsidize global markets. This creates a reinforcing loop where low foreign prices increase U.S. prices to maintain manufacturer profits (White House, 2025).
5. Healthcare Systems: Medicare and Medicaid reimbursement policies influence pricing. Limited negotiation power creates a reinforcing loop where high prices persist due to weak balancing mechanisms.
6. Patient Access: High prices restrict access, leading to non-adherence and worse health outcomes, which in turn increase healthcare costs, reinforcing the cycle of high drug prices to cover rising system costs (CMS, 2024).

Leverage Points: High-impact areas include manufacturer pricing policies, intermediary structures, and regulatory timelines, where small changes can yield disproportionate reductions in costs due to the system’s nonlinearity.

Strategies for Reducing Drug Prices by 30–80%

Using systems dynamics, the following strategies target leverage points, address feedback loops, and account for nonlinearities and delays, aligning with the Executive Order’s objectives.

1. Implementing Most-Favored-Nation (MFN) Pricing

The Executive Order directs HHS to enable direct purchases at MFN prices, aligning U.S. costs with those in comparable nations. This targets a leverage point in manufacturer pricing.

• Mechanism: Create a direct-to-consumer platform bypassing intermediaries, enforcing MFN prices benchmarked to countries like Canada or Germany. This introduces a balancing feedback loop to counteract the reinforcing loop of rising U.S. prices.
• Nonlinear Impact: A 2020 RAND study suggests U.S. prices are 2.56 times higher than in 32 countries. MFN pricing could reduce prices by 50–70% for brand-name drugs, with amplified effects as manufacturers adjust global pricing strategies to avoid profit losses.
• Feedback Dynamics: Manufacturers may resist, creating a reinforcing loop of reduced drug availability unless HHS imposes penalties (as proposed in the Executive Order), strengthening the balancing loop.
• Delays: Implementation may face 1–2 years of regulatory and legal delays, requiring phased rollouts to maintain momentum.

Source: Mulcahy, A. W., et al. (2020). International Prescription Drug Price Comparisons. RAND Corporation.

2. Enhancing Price Transparency

The Executive Order’s focus on radical transparency targets a leverage point in obscured pricing by intermediaries. Transparency disrupts the nonlinear effects of hidden rebates.

• Mechanism: Mandate public disclosure of list prices, net prices, and R&D costs via an HHS database. This creates a balancing feedback loop where consumer pressure and provider awareness force manufacturers to justify prices.
• Nonlinear Impact: Transparency could reduce prices by 10–20% by curbing PBM rebate retention, which accounts for 20–50% of list prices (Trish et al., 2021). Small transparency gains can trigger significant market shifts as patients choose lower-cost options.
• Feedback Dynamics: Industry pushback may create a reinforcing loop of resistance, but public demand for fairness can amplify the balancing loop.
• Delays: Data collection and platform development may take 6–12 months, necessitating interim transparency measures.

Source: Trish, E., et al. (2021). Pharmacy Benefit Managers and Their Impact on Drug Prices. USC Schaeffer Center.

3. Streamlining Intermediaries

Bypassing PBMs, as proposed in the Executive Order, targets a leverage point in the supply chain, reducing nonlinear cost markups.

• Mechanism: Develop government-regulated platforms for direct manufacturer-to-pharmacy or patient sales, expanding pilot programs for low-income patients. This weakens the reinforcing loop where intermediaries inflate costs.
• Nonlinear Impact: Eliminating PBM markups could cut costs by 15–30% (Cubanski et al., 2023), with greater savings for high-cost drugs due to disproportionate markup structures.
• Feedback Dynamics: PBMs may resist, creating a reinforcing loop of lobbying, but consumer savings create a balancing loop favoring reform.
• Delays: Supply chain restructuring may take 2–3 years, requiring phased implementation to avoid disruptions.

Source: Cubanski, J., et al. (2023). How Pharmacy Benefit Managers Affect Prescription Drug Prices. Kaiser Family Foundation.

4. Accelerating Generic and Biosimilar Competition

Promoting generics, as outlined in the Executive Order, targets a leverage point in regulatory delays.

• Mechanism: Shorten exclusivity periods and expedite FDA approvals for generics and biosimilars. This strengthens a balancing feedback loop where competition drives prices down.
• Nonlinear Impact: Generics can reduce prices by 30–80%, as seen with drugs like atorvastatin (FDA, 2024). Small changes in approval timelines can flood markets with low-cost options.
• Feedback Dynamics: Manufacturers may use “patent thickets,” reinforcing high prices, but stronger FDA enforcement can counter this loop.
• Delays: Patent reforms face 2–5 years of legal challenges, necessitating immediate action on approval streamlining.

Source: FDA. (2024). Generic Drug Program Annual Report.

5. Reforming International Trade Practices

The Executive Order’s focus on foreign pricing practices targets a leverage point in global cost disparities.

• Mechanism: Negotiate trade agreements to ensure foreign nations share R&D costs or allow safe drug importation. This disrupts the reinforcing loop where low foreign prices increase U.S. costs.
• Nonlinear Impact: Importation could reduce prices by 40–60% (CBO, 2022), with amplified effects if foreign markets adjust pricing to avoid trade penalties.
• Feedback Dynamics: Foreign resistance may create a reinforcing loop of trade disputes, but U.S. market power strengthens the balancing loop.
• Delays: Trade negotiations may take 3–5 years, requiring interim importation programs to deliver savings.

Source: Congressional Budget Office. (2022). Effects of Drug Importation on Prices and Innovation.

6. Empowering Government Negotiation

Expanding Medicare and Medicaid negotiation, as proposed, targets a leverage point in purchaser power.

• Mechanism: Enable HHS to negotiate prices using MFN benchmarks, building on the Inflation Reduction Act of 2022. This creates a balancing feedback loop to counter high prices.
• Nonlinear Impact: Negotiation could reduce prices by 20–50%, with larger savings for high-cost drugs (Anderson et al., 2023).
• Feedback Dynamics: Industry lobbying may reinforce high prices, but public support for savings strengthens the balancing loop.
• Delays: Legislative changes may face 1–2 years of delays, requiring pilot negotiations to build momentum.

Source: Anderson, G. F., et al. (2023). International Health Care System Profiles. Commonwealth Fund.

Improving Patient Access Through a Systems Dynamics Approach

High prices restrict access, creating a reinforcing loop where non-adherence increases healthcare costs, further driving drug prices. Interventions include:

• Subsidized Access: Expand discounts for low-income patients, as proposed in the Executive Order, breaking the non-adherence loop. CMS (2024) notes 20% of uninsured patients skip medications due to cost.
• Telepharmacy and Direct Delivery: Use technology to bypass costly intermediaries, creating a balancing loop for access.
• Education and Transparency: Equip patients with price comparison tools, reinforcing transparency’s balancing loop.

Systems Integration: Leveraging Dynamics for Change

To achieve 30–80% price reductions, integrate strategies using systems dynamics principles:

1. Policy Alignment: Coordinate HHS, FDA, and trade policies to strengthen balancing loops, targeting leverage points like manufacturer pricing and regulatory delays.
2. Stakeholder Collaboration: Engage manufacturers and insurers to align incentives, countering reinforcing loops of resistance.
3. Technology Enablement: Use digital platforms to accelerate balancing loops for transparency and access, minimizing delays.
4. Monitoring and Enforcement: Create an oversight body to monitor feedback loops and nonlinear outcomes, ensuring sustained impact.

Nonlinear Leverage: Combining MFN pricing, transparency, and generic competition could yield disproportionate savings due to cascading effects across the system, potentially exceeding 80% for certain drugs.

Delays Management: Phased implementation and pilot programs can mitigate delays, maintaining momentum while regulatory and trade reforms mature.

Conclusion: Why a Systems Dynamics Approach to Lowering Drug Prices Is Essential

A systems dynamics approach to lowering drug prices by 30–80% targets leverage points, harnesses balancing feedback loops, and anticipates nonlinear outcomes and delays. The Executive Order of May 12, 2025, provides a framework to disrupt reinforcing loops of high prices through MFN pricing, transparency, and competition. By integrating these strategies with stakeholder collaboration and technology, the U.S. can achieve equitable pricing and enhance patient access.

References

• The White House. (2025). Fact Sheet: President Donald J. Trump Announces Actions to Put American Patients First by Lowering Drug Prices and Stopping Foreign Free-riding on American Pharmaceutical Innovation.
• Mulcahy, A. W., et al. (2020). International Prescription Drug Price Comparisons. RAND Corporation.
• Trish, E., et al. (2021). Pharmacy Benefit Managers and Their Impact on Drug Prices. USC Schaeffer Center.
• Cubanski, J., et al. (2023). How Pharmacy Benefit Managers Affect Prescription Drug Prices. Kaiser Family Foundation.
• FDA. (2024). Generic Drug Program Annual Report.
• Congressional Budget Office. (2022). Effects of Drug Importation on Prices and Innovation.
• Anderson, G. F., et al. (2023). International Health Care System Profiles. Commonwealth Fund.
• Centers for Medicare & Medicaid Services. (2024). Medication Adherence Among Uninsured Populations.