US President Donald Trump signed an executive order Sunday to lower drug prices.

The purpose of the order is to cap the amount that Medicare would pay for pharmaceutical drugs relative to the prices paid by other nations. The cap is set at the lowest price of the drug that other nations have bargained with pharmaceutical companies:

(a) It is the policy of the United States that the Medicare program should not pay more for costly Part B or Part D prescription drugs or biological products than the most-favored-nation price.

(b) The “most-favored-nation price” shall mean the lowest price, after adjusting for volume and differences in national gross domestic product, for a pharmaceutical product that the drug manufacturer sells in a member country of the Organisation for Economic Co-operation and Development (OECD) that has a comparable per-capita gross domestic product.

Under the executive order, Medicare Part B and Medicare Part D procedures differ. For Medicare Part B, the US Department of Health and Human Services (HHS) Secretary will create rules to test a payment model in which Medicare Part B patients would not pay more than the lowest price that other nations pay for that drug. The test will determine whether this new policy “mitigate[s] poor clinical outcomes and increased expenditures associated with high drug costs.”

For Medicare Part D, the test will measure the same factors, but the payment model must comply with 42 USC § 315a(b)(2)(A).

This executive order revokes and replaces the previous July executive order on drug prices. In that order, the president instructed HHS to take actions to end kickbacks, pass on insulin and epinephrine savings to the medically disadvantaged, allow states to implement drug importation plans, and enact other reforms.