Despite the apparent success of the Inflation Reduction Act (IRA) in lowering prices for key Medicare prescription drugs, pressure continues to mount on pharmaceutical manufacturers with the Trump administration’s quest to put America first by further reducing prices of prescription drugs. One proposal has taken center stage in the pharma pricing conundrum: should the US tie its drug prices to those in other similar per capita economic countries—aka the most-favored nation (MFN) model?

While this debate hypothesizes the potential for substantial cost savings, it also raises complex questions about access, innovation, and global market dynamics. It inherently brings the first question: why would the US import drug prices, but not prices from other industries, even within healthcare?

The MFN clause: Origins and renewed momentum

Originally introduced in 2020 and revived in 2025 via executive order (EO), the MFN policy seeks to align US prices for certain branded drugs, particularly those without generic or biosimilar competition, to the lowest price available in select Organization for Economic Co-operation and Development countries with a GDP per capita of at least 60% of the US level. This methodology yields a reference basket of roughly 25 diverse countries, ranging from Luxembourg and Switzerland to Slovenia and Lithuania.

However, upon closer inspection, this GDP-based reference system cracks. While these countries may qualify economically, their healthcare infrastructure and pharmaceutical access differ significantly from the US. In Lithuania, for example, 75% of European Medicines Agency-approved drugs were not available as of early 2025, with a median time to market of 859 days. This highlights the disconnect between affordability and accessibility.

It raises the question of how MFN can be implemented, not just which countries to reference, but which prices, and how those prices would be gathered and validated.

The End Price Gouging for Medications Act: A small improvement on a flawed design

Recognizing the pitfalls of the GDP method, a bicameral group of lawmakers introduced the End Price Gouging for Medications Act in May 2025.¹ This bill proposed capping US drug prices based on the lowest ex-factory price across 12 peer nations—Australia, Austria, Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, and the UK. These countries were selected for their comparable economic and healthcare structures, making the proposal more practical than the broader EO-based reference basket.

This raises the next key question: What if MFN were applied using this narrower, more targeted method?

We analyzed pricing data for 12 high-cost drugs from Medicare Part B and Part D, comparing US wholesale acquisition costs (WAC) with the lowest prices in the reference countries. Drugs included high-revenue products such as Keytruda, Ozempic, Imbruvica, and Entresto.

The Bottom line: Steep price drops, big revenue hits

Our analysis revealed sharp reductions in US prices, ranging from 67% to 93% under the MFN approach (see Table 1 below), with Australia and Japan often emerging as the lowest-priced markets.

For example:

• Keytruda: 75% price reduction
• Entresto: 92% price reduction
• Ozempic: 93% price reduction
• Imbruvica: 79% price reduction

Even compared to the maximum fair prices (MFPs) recently negotiated under the IRA, MFN-based discounts are significantly deeper. For instance:

• Imbruvica’s MFP under IRA: 38% discount
• Imbruvica under MFN: 79% discount
• Entresto’s IRA discount: 53%
• Entresto under MFN: 92%

These reductions translate to an average 82% decline in US top-line sales and a 53% drop in global top-line revenue for the drugs analyzed. Across the 12 drugs studied, that means a fall from $97 billion in global sales to just $47 billion, a staggering impact on the pharmaceutical industry (see Table 2 below).

It’s important to recognize that international reference pricing can lead to circular pricing references, where countries reference each other’s prices in a loop. While this might be flagged as an error in Excel, it’s also a real-world pricing issue. For example, if Japan uses US prices as a reference and the US, in turn, adopts an MFN approach that considers Japan’s prices, it can create a feedback loop. Attempting to account for these spillover effects becomes complex, especially when multiple countries adjust their pricing in response to changes such as the MFN.

The last key question: Could MFN be implemented at all?

We are neither lawyers nor policymakers. But, legally, implementing the executive order of MFN as a blanket policy seems to go against the legislation that creates/supports Medicare, for example, where central negotiations are limited. Legislative changes are more viable to be applicable, but need greater review of the process and reach. There may be an easier way to push legislation via the already approved IRA pathway versus this bulldozer-like approach. While the MFN policy presents a compelling opportunity to reduce costs within the US healthcare system, it also introduces important considerations that could influence global access, innovation, and strategic decision-making within the life sciences industry.

That brings us to the last key question: should MFN be implemented? Inherently, the importation of ex-US prices into any market, much less healthcare, goes against the capitalism that makes this country great, and ignores the fact that other costs from healthcare to technology to clothing are also significantly cheaper in other economies.

It also raises the questions of other components of the healthcare ecosystem—why import just pharmaceutical prices? Why not physician salaries? Hospital operational budgets?

What about other markets? For example, imagine importing some of the commercial real estate prices from Portugal into the US—and watching the entire market crater by 50%. Every loan would be underwater; every banker shocked beyond imagination. That’s what MFN does to pharma revenues: $97 billion becomes $47 billion in one policy cycle and will disrupt a global market for healthcare in terms of innovation, access, and health, with unknown impacts for a long period of time.

The pharma industry is trying to find ways to appease the administration. For instance, the EO contained information on direct-to-patient prices, and some manufacturers have begun robust DTC for certain products. To offset pricing pressures, companies have started raising prices in other countries. For example, Eli Lilly, starting Sept. 1, increased the price of Mounjaro by up to 170% in the UK, to address global pricing inconsistencies.

These responses, however, only scratch the surface of the broader strategic and operational challenges that MFN-based pricing policies could trigger.

The following are three major areas of long-term impact:

1. The impact on innovation trajectories. The US market accounts for a substantial share (up to 75%) of global revenues for some pharmaceutical manufacturers. A significant reduction in prices could influence how companies allocate resources, potentially shifting focus away from high-risk R&D investments toward more commercially viable projects. This may, over time, affect the pace at which innovative therapies are brought to market.

2. The Implications for global launch strategy. To navigate new pricing pressures, pharma manufacturers may need to reassess their global launch sequencing and pricing models. This could include strategies such as:

• Adjusting the timing of therapeutic product launches in reference countries.
• Revisiting pricing structures in international markets.
• Exploring private market entry where public reimburse-ment dynamics are challenging.

These adaptations, while intended to preserve long-term commercial viability, may inadvertently impact the speed and breadth of patient treatment and healthcare access in certain geographies, particularly in markets that rely heavily on international price referencing.

3. The complexities in international price comparisons. While the intent behind using international prices as benchmarks is to promote fairness, relying solely on the lowest visible ex-factory prices may not reflect actual net prices paid after confidential discounts and negotiations. In countries such as Germany and Italy, average discounts can range from 32% to 55%. As such, using list prices as anchors for US policy may lead to unintended distortions in pricing expectations and policy outcomes.

A balanced path forward

The MFN pricing approach, while politically attractive, raises complex questions about how to fairly and sustainably price innovation. It underscores the fragility of international reference pricing systems, where a change in one country’s price policy can set off a domino effect across global markets.

It also highlights the importance of looking beyond brand pricing. While US prices for brand-name drugs remain high, 93% of prescriptions in the US are filled with generics, often at significantly lower prices than in other developed nations. A holistic assessment must weigh both short-term savings and long-term consequences, particularly in terms of access, innovation, and global health equity.

A MFN policy may offer immediate financial relief for some stakeholders in the pharma ecosystem, but it also brings the risk of significant long-term disruptions to the healthcare system. This, in turn, could lead to consequences that could be potentially catastrophic and must be assessed from multiple angles rather than rushed through. But given the revenue cliff it represents, it is hard to envision how it will reduce costs in the US versus reduce access worldwide.

The devil is in the details, and, unfortunately, there are few clear details to go on. As the US continues to explore mechanisms to manage drug pricing, policies must be crafted with a focus not only on affordability but also on sustainability, innovation, and global access.

The challenge lies not in identifying the lowest price, but in determining the fairest price—one that balances the need to reward innovation with the imperative to ensure broad and timely access to life-saving treatments across global markets.

William Lobb, VP, Strategic Initiatives, PRMA (pricing, reimbursement, and market access); Matthew Skoronski, Senior Director, PRMA; both with Indegene

References

1. H.R.8325 - Physician and Patient Safety Act. Congress.gov. https://www.congress.gov/bill/118th-congress/house-bill/8325

2. Medicare Part B Spending by Drug. Centers for Medicare & Medicaid Services. https://data.cms.gov/summary-statistics-on-use-and-payments/medicare-medicaid-spending-by-drug/medicare-part-b-spending-by-drug

3. Medicare Part D Spending by Drug. Centers for Medicare & Medicaid Services. https://data.cms.gov/summary-statistics-on-use-and-payments/medicare-medicaid-spending-by-drug/medicare-part-d-spending-by-drug