(Reuters) -U.S. President Donald Trump signed a broad executive order on Monday directing drugmakers to lower the prices of their prescription drugs to align with what other countries pay.

White House officials said the government will give drugmakers price targets in the next month, and will take further action within six months if the companies do not make "significant progress" toward the goal of lower prices.

Here is what you need to know: 

WHAT IS TRUMP'S STANCE ON PRESCRIPTION DRUG PRICES?

Trump has sharply criticised the pharmaceutical industry for years over the price of medicines in the United States. He has also chided other wealthy nations for "freeloading" on U.S. pharmaceutical innovation.

During his first term, in 2017, he accused the industry of "getting away with murder" in the prices they charge the government for prescription drugs.

Trump's proposed international reference pricing program was blocked by a court in 2020. 

During his 2024 presidential campaign, Trump said Americans were being overcharged for medicines compared to other nations and pledged to take action.   

On Monday, he said he wants to "equalize" prices with other countries by implementing tariffs. 

ARE U.S. DRUG PRICES MORE EXPENSIVE?

Yes. The U.S. pays the most for prescription medicines in the world, often nearly three times that of other developed nations.

Top-selling blood thinner Eliquis from Bristol Myers Squibb ( BMY ) and Pfizer ( PFE ) carries a U.S. list price of $606 for a month's supply. The previous administration of Democratic President Joe Biden negotiated that down to $295 for Medicare, which goes into effect in 2026, but the drug costs $114 in Sweden and just $20 in Japan.

WHAT IS TRUMP GOING TO DO ABOUT IT?    

Since taking office in January, Trump has reiterated that he wants to end this inequity. On Sunday, he announced on Truth Social that he would sign an executive order to pursue "most favoured nation" pricing.

Also known as international reference pricing, it seeks to narrow the gap between the U.S. and foreign drug prices. Reuters reported in April such a policy was under consideration.

The executive order on Monday differed from what drugmakers had been expecting. Lobbyist sources had told Reuters ahead of the order's signing on Monday that they expected the "most favored nation" pricing to apply to drugs for Medicare patients. But the order appeared to apply to all medicines.

Separately, Trump has also pushed for drugmakers to boost U.S. manufacturing. His administration is conducting an investigation into imports of pharmaceuticals in a bid to levy tariffs on grounds that reliance on foreign production of medicine threatens national security.

HOW DOES THIS DIFFER FROM PREVIOUS PRICE REDUCTION EFFORTS?

Biden's Inflation Reduction Act allows the government to negotiate the price of its most expensive drugs within Medicare.

The prices for the first 10 prescription drugs it negotiated were still on average more than double, and in some cases five times, what drugmakers had agreed to in four other high-income countries, Reuters previously reported.

WHAT IS THE PHARMA INDUSTRY'S RESPONSE?

The industry is strongly opposed to the prospect of dramatically lower drug prices in the United States, the world's largest pharmaceuticals market. 

Two industry sources told Reuters last month that any such policy was more concerning to the industry than other potential government moves such as tariffs on imported medicines.

The main U.S. lobby group for drugmakers, the Pharmaceutical Research and Manufacturers of America, known as PhRMA, said, "to lower costs for Americans, we need to address the real reasons U.S. prices are higher: foreign countries not paying their fair share and middlemen driving up prices for U.S. patients."

"Most favored nation is a deeply flawed proposal that would devastate our nation's small- and mid-size biotech companies," said John Crowley, CEO of BIO, the main U.S. trade group for biotechnology companies, in a statement.

WHAT ARE THE CHALLENGES IN CARRYING OUT THE ORDER?

Experts warn that referencing prices from other countries is complex, as many drugs sold in the U.S. are not available abroad, and some nations do not publish what they pay for drugs or take years to negotiate prices.

The U.S. does not buy drugs directly for a national health system, as countries such as England and Germany do, instead relying on the private sector to manage drug price negotiations for both government and private health plans. 

Analysts said implementing the broad order would be difficult.

The executive order is also likely to face legal challenges, particularly for exceeding limits set by U.S. law, including on imports of drugs from abroad, legal experts said.