The Trump administration reignited the U.S. drug pricing debate by signing a sweeping Government Order on Could 12, introducing a “Most Favored Nation” (MFN) pricing framework. This coverage seeks to instantly align what Individuals pay for prescribed drugs with the bottom costs paid in peer economies similar to Germany, Switzerland, and Canada.
Whereas the messaging is evident — decrease costs for American sufferers and an equalizing of costs throughout the globe — the operational, authorized, and international implications are way more complicated. For the pharmaceutical trade, the MFN Government Order (EO) is not only a pricing directive; it’s a possible reshaping of world industrial technique, US operations, regulatory enforcement, and innovation economics.
A pricing coverage with out precedent
The MFN EO is designed to halt what the administration calls “international freeloading” — the place different developed international locations profit from U.S.-funded drug innovation at considerably decrease prices. The EO provides producers 30 days to voluntarily match the bottom worldwide costs or face a spread of potential actions together with rulemaking, importation enlargement, and antitrust investigations.
Realistically, it’s extremely unlikely we’ll see producers decrease costs inside 30 days. There’s no mechanism to do that — record costs within the U.S. will not be simply decreased. Rebates and reductions are frequent instruments, however slashing record costs throughout distribution channels would require complicated regulatory maneuvering, probably involving HHS rulemaking and even litigation if stakeholders push again. Producers which have lowered wholesale acquisition value (WAC) costs in recent times have run years lengthy packages to make sure sufferers are capable of keep on remedy and there are not any disruptions throughout distribution, pharmacy meting out, insurance coverage protection, and affected person help packages
In different phrases, the coverage’s ambition collides with the regulatory and structural complexity of U.S. drug pricing methods, that are fragmented throughout Medicare, Medicaid, industrial insurance coverage, and different employer-sponsored plans.
Balancing affordability and innovation
There’s no query that U.S. sufferers want higher entry and affordability. MFN pricing may supply reduction within the brief time period, notably if direct-to-consumer (DTC) fashions are enabled. DTC fashions have important challenges on their very own advantage. There merely isn’t any present provide chain to recover from 7B prescriptions per 12 months on to sufferers with out the important thing function that distributors, pharmacies, and different stakeholders play within the US market. Additional, its impractical and probably harmful to anticipate infused, injected, and different physician-administered medication and vaccines to be despatched on to sufferers. The important thing danger in MFN pricing is available in how income compression would possibly have an effect on innovation pipelines.
The administration’s unstated hope is to “meet within the center”: that U.S. costs come down modestly whereas worldwide costs extra considerably enhance, creating an equilibrium that preserves international revenues and helps ongoing R&D investments.
Nonetheless, getting different international locations to boost costs isn’t any small job. Many of those international locations have nationwide well being budgets and expertise evaluation frameworks that impose onerous caps on pricing. In lots of European markets, as an example, costs are negotiated primarily based on cost-effectiveness and finances affect — not on what the producer needs to cost. Prescription drug costs and general healthcare prices are, just like the U.S., lightning rod matters in lots of European international locations. Whereas these populations could help rising, for instance, protection spending, any enhance in healthcare prices is more likely to be met with fierce social and political opposition.
Even when costs overseas are decrease than within the U.S., they will nonetheless be thought of costly inside these international locations’ methods, which frequently function beneath mounted budgets for healthcare and prescribed drugs. These methods decide costs not solely primarily based on medical profit but in addition on what number of sufferers they will afford to deal with. In some instances, even a low-cost drug (in comparison with the U.S. value) could also be unaffordable at scale, delaying entry or limiting protection altogether.
And whereas the U.S. may threaten to broaden drug importation past Canada, that technique faces logistical and authorized boundaries — particularly for high-cost biologics and cold-chain medication with restricted overseas provide. It’s also unlikely that pharmaceutical producers would ship sufficient product to Canada or all different ex-US markets to fulfill the quantity of product wanted for the US inhabitants.
Attaining steadiness between affordability and innovation, each domestically and globally, requires navigating these complicated methods. With out significant alignment throughout markets, equalizing costs could stay extra aspirational than actionable.
Compliance options
Presently, the MFN EO exists with out a clear enforcement mechanism. No regulation mandates compliance, and litigation is predicted if rulemaking makes an attempt to impose pricing mandates—as seen through the Trump administration’s earlier MFN try for Medicare Half B.
Another route may very well be by way of the Middle for Medicare and Medicaid Innovation (CMMI). CMMI may pilot MFN pricing in a nationwide Medicare and Medicaid program, permitting for limited-scope implementation with out new laws. This pilot method may additionally not directly have an effect on industrial pricing by triggering Greatest Value resets, which may decrease 340B ceiling costs and ripple throughout payer sorts. Industrial plans and PBMs may additional try and leverage these decrease authorities costs as a method to not directly cut back industrial costs, although related previous efforts have been much less profitable.
World commerce video games: Pharma as the brand new bargaining chip
One of the geopolitically delicate components of the EO is its implied intent to make use of commerce ways, together with tariffs or export controls — to stress overseas governments to boost drug costs. It may develop into a commerce sport with pharm concerned, one thing that hasn’t occurred traditionally. The commerce sport involving healthcare is additional challenged contemplating there are APIs, medical provides, and different merchandise that aren’t made within the US and for which the US replies upon imports – a situation the place overseas governments threaten to withhold these merchandise from the US in response to US threats doesn’t profit both facet.
This raises a contradiction. On one hand, the administration needs to import cheaper medication from different nations. On the opposite, it needs those self same international locations to boost their costs. If the U.S. finally ends up shopping for lower-cost imports whereas failing to get worldwide costs to rise, pharma may lose income from each ends.
The broader value debate
It’s necessary to keep in mind that prescribed drugs account for roughly 10% of complete U.S. healthcare prices. Hospital stays, emergency visits, power illness administration and administrative overhead make up the remainder. With latest medical value developments displaying 8-9% annual will increase, even when drug costs fell considerably, complete healthcare spending would stay largely unaffected.
Navigating the unknown
The MFN Government Order is a daring try and recalibrate international drug pricing — with U.S. sufferers on the heart. However with out clear enforcement, authorized grounding, or worldwide cooperation, its future stays very unsure. Pharmaceutical firms should put together for litigation, potential commerce friction, and a fluid regulatory panorama which will evolve by way of CMMI pilots or company rulemaking.
Firms ought to keep agile, conduct situation modeling, and put together for a healthcare ecosystem that more and more hyperlinks international affordability to U.S. pricing coverage.
This second requires greater than compliance. It calls for management — throughout product technique, pricing design, and public belief. How the trade responds will form not simply margins, however the way forward for innovation and entry within the U.S. and past.
Photograph: gerenme, Getty Pictures
Glenn Hunzinger is a Associate and Well being Industries Chief at PwC US. He advises shoppers throughout the well being trade on strategic, regulatory, and industrial transformation.
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