"Because most wealthy countries cap what drugmakers can earn, the United States accounts for an outsized share—roughly three-quarters—of global pharmaceutical profits. In other words, US revenue is what keeps drug research alive."
Commentary
Article
Most Favored Nation Drug Pricing Undermines What Makes America Great
Author(s):
Most Favored Nation drug pricing proposal aims to tie US medicine costs to lower European rates, but experts warn this approach could restrict patient access to lifesaving treatments, slow innovation, and jeopardize future drug development by importing flawed foreign price-control models.
Image Credit: Adobe Stock Images/Alex Puhovoy. The Most Favored Nation (MFN) proposal would tie US drug prices to the lowest prices paid in other wealthy countries.
President Trump wants to make America's drug pricing system more like Europe's. But in the process, he risks unintentionally cutting off Americans' access to lifesaving medicines.
The Most Favored Nation (MFN) proposal would tie US drug prices to the lowest prices paid in other wealthy countries. The rationale is intuitive: Other countries typically pay considerably less for the same medicines, so why should Americans have to pay more?
Unfortunately, the White House is overlooking critical differences between America's healthcare system and Europe's. Other countries only achieve their lower prices by rationing patients' access to medicines.
Importing European prices inevitably means importing their access restrictions too, in one form or another. Foreign governments use a variety of methods to control prices.
Some index their prices to those in other nations, just as the White House plan would do. Some impose mandatory rebates or clawbacks on drugmakers.
Many also employ standardized health technology assessments (HTAs). In theory, these assessments offer a way to quantify a medicine's cost-effectiveness, and thus, enable Europe's largely government-run healthcare systems to set an appropriate price for drugs.
In practice, though, HTAs are designed in such a way that they regularly undervalue innovative medicines, sometimes setting prices as low as 4% of the medicine's true value. They also discriminate: Because many elderly patients and those with chronic illnesses or disabilities start from a lower baseline of health, HTAs often deem treatments for these patients and conditions less cost-effective.
These price control mechanisms result in lower costs, but they come with steep tradeoffs. When a government decides it will only pay pennies on the dollar for a new drug that costs billions to develop, companies have little reason to rush that drug to market.
As a result, European patients abroad often wait years for innovative therapies that Americans can access within months. More than half of new drugs are launched first in the United States.
European patients have access to far fewer new drugs overall. As of 2022, Americans had access to roughly three-quarters of medicines recently launched anywhere in the world.
Germany, the next-closest country, only had access to about half of new drugs. The United Kingdom and Japan had access to about 40% each.
Italy and France had access to just over a third of new drugs, and Canada just over a quarter. And in all those countries, patients often wait a year or more for medicines launched in the United States to become available, which has very real consequences for patients.
For example, a UK health system watchdog recently undervalued a game-changing breast cancer drug. As a result, the drug is currently being withheld from 500 English women who could benefit from it.
Thanks to faulty assessments like these, multiple life science companies say they'll be forced to pull investments from and stop running clinical trials in the UK.
MFN pricing risks bringing similar market disruptions and access barriers to the United States. It could leave patients stuck with outdated or less effective treatments or force them to watch their health worsen while newly developed therapies remain out of reach.
And because MFN would copy pricing decisions shaped by biased and discriminatory HTAs, patients with disabilities and chronic conditions would likely be hardest hit. Worst of all, MFN would have crushing effects on medical innovation.
Developing a single new drug costs upwards of $2 billion. Companies only take on those costs if they can recover them later.
Because most wealthy countries cap what drugmakers can earn, the United States accounts for an outsized share—roughly three-quarters—of global pharmaceutical profits. In other words, US revenue is what keeps drug research alive.
If the United States were to import foreign countries' drug price caps, innovators' expected revenues would plummet—dramatically reducing their ability to invest in breakthrough research. A University of Chicago study found that MFN-style price controls could cut private research spending by as much as 60% and prevent more than 340 medicines from entering the market.
That would be catastrophic for patients.
It would mean losing out on therapeutic advances that make treatments more effective, gentler, and more convenient, such as drugs reformulated as pills instead of infusions. And it would mean countless people battling cancer, Alzheimer's disease, and other rare or debilitating conditions left without hope of a cure.
America's healthcare system is far from perfect, but it gets one important thing right: Patient welfare depends on innovation and access to new medicines, not just low costs.
We can't afford to sacrifice access for lower prices. The Trump administration would be wise to search for other reforms that improve affordability without jeopardizing drug access and innovation.
About the Author
Andrew Spiegel is Board Chair of the World Patients Alliance.
Newsletter
Lead with insight with the Pharmaceutical Executive newsletter, featuring strategic analysis, leadership trends, and market intelligence for biopharma decision-makers.
Related Videos
Related Content
