Most-Favoured Nation Pricing: What Do the Experts Think?

What is MFN, and what does it aim to achieve?

• MFN aims to tie US pharmaceutical price levels to those of peer nations. The ‘four pillars’ of MFN are:
• Prospective MFN: For new launches, manufacturers agree not to offer better prices, after GDP adjustment, to the MFN reference basket countries, compared to the United States.
• Provision of MFN prices via GENEROUS: Manufacturers rebate back to Medicaid the difference between the US price and the reference price from the MFN basket.
• Lower prices via TrumpRx: TrumpRx establishes a direct-to-patient channel, allowing patients to access lower prices for their medicines when they are unable to obtain them through insurance.
• Increased prices in other countries via trade policies: The use of tariffs to encourage other countries to increase what they pay for innovative medicines.

Crucially, as speakers made clear throughout the conference, MFN is not just about attaining lower prices in the United States; its primary ambition is price convergence—an objective born out of the context of the United States paying close to three times more than peer nations on branded pharmaceuticals. Thus, the goal is two-fold: that the United States will pay less for medicines, and that other countries will pay more. Whether MFN will achieve these aims, however, was a contested topic of discussion.

MFN is inextricably linked to trade policy

The fourth pillar of MFN focusses on trade policy—the main lever by which the United States aims to achieve price convergence across countries. The Trump Administration’s announcement of 100% tariffs on branded pharmaceuticals effectively serves as leverage in negotiations with other countries.

Speakers pointed to the UK-US trade deal as the most prominent example of the Trump Administration’s trade policy being effective. The deal commits the UK to increasing drug spending from 0.3% to 0.6% of GDP over 10 years, raising NICE’s cost-effectiveness threshold by 25%, moving to a new set of EQ-5D-5L weights, and capping the VPAG clawback scheme at 15%. In return, the United States offered tariff protection for UK pharmaceuticals for three years. Though speakers were sceptical about the balance of this deal, this is a concrete example of the Trump Administration using trade as a means to achieve higher prices in other countries.

Germany was provided as a counterexample to the UK. Rather than accommodating MFN, Germany is moving in the opposite direction, proposing higher rebates and doubling down on cost-containment—the opposite of what the Administration wants to achieve. Ultimately, whether trade pressures can effectively shift prices in countries remains an open question.

No country is an island

A key insight, emphasized by many speakers at the conference, was that MFN is already disrupting the country-specific approach to making pricing and reimbursement decisions. For companies, launch decisions and pricing strategies are now, more than ever, global considerations.

Speakers noted that some manufacturers are already making difficult decisions: Novartis, for instance, has chosen not to launch medicines in the UK because the prices on the table would not be economically viable. Data presented by John Campbell of the National Pharmaceutical Council showed that first launches in Europe have declined dramatically over the most recent decade, while the United States has held steady, and launches in China have increased significantly. While these trends predate MFN, they indicate a trend that is likely to be reinforced and accelerated by MFN.

MORSE Consulting Chief Strategy Officer Sang Mi Lee provided the Canadian perspective on the effects of MFN, offering that MFN has reduced the ability to negotiate in Canada and have more uniquely ‘Canadianized’ solutions, as global teams are requiring oversight of all country-specific negotiations. Some companies, she explained, have delayed entering the Canadian market—and others are exploring private-payer-only strategies. European- and Asian-headquartered companies seem to be waiting for clarity before committing to a specific course of action. Ultimately, Lee characterised the overall mood in Canada as one of uncertainty and watchful waiting.

However, it’s not just the MFN reference countries—like Canada—that are being impacted by MFN; rather, we are likely to see what speakers referred to as “basket overflow.” That is, the countries in the MFN reference basket are themselves referencing (and/or referenced by) other countries, such that the effective reach of MFN extends well beyond its stated scope, and the US is likely importing pricing influences from countries beyond their specified criteria

Finally, a key theme mentioned by several speakers was that MFN is being implemented in a highly complex policy environment. Even within the US, the addition of MFN to what was already a complex network of interacting policies bring more confusion to an already opaque pricing system: a theme that was captured in a panel session on the “Alphabet Soup of Drug Pricing.” But even more fundamental is the emerging and intricate web of global policy changes. In particular, the European General Pharmaceutical Legislation (GPL) and its interaction with MFN could breed further uncertainty. The GPL encourages broader access by requiring that companies launch their medicines in all 27 member states or risk losing market protection in those countries. This could directly compete with the incentives created by MFN: launch delays and strategic sequencing. Adding the EU’s Joint Clinical Assessment (JCA) to the mix of MFN and GPL creates what Jens Grueger referred to in the final plenary as “not an attractive cocktail.”

Both payers and manufacturers are exploring strategies to limit exposure to MFN’s effects: contractual confidentiality clauses that make it impossible to disclose prices; outcomes-based agreement or managed access agreements that obscure net prices; and differentiated products targeting different indications within and outside the US.

Ultimately, speakers were largely aligned on the fact that MFN has globalised core pricing and market access decisions. At the same time, it has introduced significant uncertainty around its effects, including its interactions with other policies being enacted simultaneously.

Price-without-context

Experts cautioned that international reference pricing (IRP) can result in the importation of other countries’ prices without the context that gives rise to those prices. That is, when a price is set in another country’s healthcare system, it is typically the product of that system’s priorities, HTA methods, and willingness and ability to pay. Extracting that price and applying it in a different system is not necessarily a sensible approach, speakers argued. Liz Fowler—former Deputy Administrator and Director of the Innovation Center at the Centers for Medicare & Medicaid Services—argued that importing another country’s medicine prices without importing the context that produces them is like importing their train fares without importing the trains.

Experts noted that the United States has historically placed a high premium on access, and, as a result, patients in the United States have had access to more drugs more quickly than other nations. Countries in the MFN reference basket, conversely, tend to place a greater emphasis on cost-containment and also use different methodological tools (such as QALYs, banned for use in US federal programs) to evaluate a medicine’s value to their healthcare system. Anchoring US prices on prices produced by other systems could effectively import their preferences and values, speakers argued.

The innovation and access trade-off

A persistent concern across multiple sessions was the effect of MFN on long-term investment in pharmaceutical R&D. While IRP can be effective as a short-term cost-containment tool, its long-term effects can be more complicated.

Speakers noted that the United States currently accounts for the majority of launch revenue for major pharmaceutical markets. If MFN results in lower prices in the United States, and this differential is not made up for by ex-US countries, there is a risk that R&D investment and innovation in the long-term could be hampered.

Darius Lakdawalla of the USC Schaeffer Institute made the point that pharmaceutical pricing policy is often about a trade-off between today’s patients and tomorrow’s—and that the downsides of pricing policy are inherently invisible. While MFN might bring about broader or cheaper access today, there is a need for policymakers to think about the invisible innovation that could be foregone as a result.

Could MFN be the catalyst for value-based pricing?

While discussions about MFN tended to center on the downside risks, speakers across several sessions noted that with this disruption could come opportunity. Indeed, MFN has ushered in conversations about the inadequacy of IRP for capturing value, the problems associated with importing prices without context, and the notion that narrow cost-containment might be undervaluing innovation—all of which could make the case for value-based pricing in the United States and elsewhere. OHE Deputy Chief Executive Lotte Steuten emphasised that this moment could push countries to become “Most Forward-looking Nations,” adopting not only value-based pricing, but broader frameworks that fully capture the value generated by new medicines.

There are more immediate practical opportunities, too. MFN is pushing payers and manufacturers towards more sophisticated arrangements, like outcomes-based agreements, which could result in high-quality infrastructure for real-world evidence generation. Meaningful consideration of domestic R&D investments and their economic spillovers is also becoming a more prominent consideration across countries.

MFN has introduced a level of uncertainty and complexity that could take years to fully understand. That said, and as noted by the opening plenary speaker Inmaculada Hernandez from CMS: this is exactly the type of puzzle we—as health economics and outcomes research professionals—were built to solve. The disruption of this moment may prompt foundational consideration and refinement of how to appropriately measure and reward the value of medicines.