Pharmaceutical Industry Faces Legal Uncertainty Over MFN Executive Order

In an interview with Pharmaceutical Executive, Ron Lanton, Partner Lanton Law, discussed the potential legal vulnerabilities surrounding the Most Favored Nation (MFN) executive order. As the policy seeks to tie US drug prices to lower prices paid in foreign countries, it has raised significant concerns among pharmaceutical stakeholders. Lanton outlined the legal grounds on which companies might challenge the order, focusing on issues of due process, intellectual property rights, and the potential for regulatory takings.

Pharmaceutical Executive: What are the potential legal vulnerabilities or grounds for litigation from pharmaceutical companies or other stakeholders against the MFN executive order, particularly regarding due process or property rights?

Ron Lanton: The MFN model was already challenged in 2020 and encountered significant legal pushback, which ultimately stalled its progress. I think relying on foreign prices without proper analysis or safeguards could be seen as a misrepresentation, potentially violating the Federal Trade Commission Act in terms of consumer pricing.

There’s also the issue of the order’s broad directives and the lack of specific implementation details. That ambiguity could lead to legal challenges around what MFN pricing actually entails and whether it infringes on companies’ due process rights.

Pharmaceutical companies may also argue that the model effectively diminishes the value of their intellectual property without fair compensation. This is the basis of what’s known as a “takings” argument—they’d claim that forcing lower prices reduces the value of their assets and IP, amounting to a regulatory taking.

On the other hand, the government will likely argue that this doesn’t constitute a taking because it doesn’t prevent companies from selling their products or profiting—it simply lowers the reimbursement rate.

How that argument plays out in court remains to be seen. For now, I think the takings issue is likely to become a central focus in future litigation, perhaps more so than we've seen in past challenges.