Most Favored Nation Drug Pricing is a policy advanced during the first and second Trump administrations in which drug prices in the United States are tied to foreign drug prices.
Most Favored Nation Drug Pricing is a policy advanced during the first and second Trump administrations in which drug prices in the United States are tied to foreign drug prices.
Prescription drug prices in the United States are much higher than costs abroad. [1] [2] Many other countries have a centralized drug negotiation in which pharmaceutical companies are forced to give a single deal to the whole country. The US also has high costs from Pharmacy Benefit Managers which negotiate rebates with drug manufactures but do not pass these savings on to consumers. [3] Trump framed the resulting system as the U.S. being forced to subsidize the cost of pharmaceutical research and other nations not paying their fair share. [2] [4]
In between the two Trump terms, the Biden administration passed the Inflation Reduction Act which allowed Medicare to negotiate prices for some drugs. [2]
During Trump's first term he sought to bring American drug costs in line with other nations. [4] [2] [5] Republican congressman Rick Scott introduced an MFN pricing bill to congress but failed to gain support. [4] Democratic congresswoman Nancy Pelosi also introduced a bill for Medicare to negotiate prices with caps based on what other countries pay; however, she did not use the MFN terminology. [6] HHS published new rules which applied MFN pricing to certain Medicare Part B drugs as a demonstration program on November 27, 2020. [5] [7] However, policy was quickly shut down by courts because the White House failed to follow the Administrative Procedures Act. [5] [1] The Biden administration subsequently removed the original MFN policy. [2] PhRMA lobbyists opposed any form of structuring drug prices based on what other nations pay. [6]
Executive Order 14297, titled Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients, was signed on May 12, 2025. The order aims to reduce the cost of prescription drugs by directing federal agencies to link U.S. prices to the lower prices paid for the same drugs in a group of other developed countries. [8] He stated that the policy would reduce prescription drug prices significantly and end the U.S. "subsidizing the health care of foreign countries." He claimed prices could fall by 30% to 80% or even more. [2] [5] The order directs the Department of Health and Human Services to communicate price targets to pharmaceutical manufacturers and, if necessary, pursue rulemaking to impose MFN pricing across the U.S. healthcare system, including commercial markets, Medicare, and Medicaid. [2] [5] It also instructs the Department of Commerce, along with the U.S. Trade Representative, to take action against other nations that Trump claims are pursuing unfair practices to keep down drug prices. A different EO, which Trump signed in April 2025, directed the Food and Drug Administration to open up a re-importation process to bring drugs from Canada to the United States. This new EO directs the FDA to expand the reimportation program to other nations. [2]
During the announcement for Executive Order 14297 Mehmet Oz, the Medicare and Medicaid administrator, noted that prices negotiated under existing Medicare rules still tend to be higher than what European systems pay. [9]
Prior to this Executive Order the Trump administration tried to pressure congress to include MFN pricing for Medicare in legislation, but Republican representatives opposed cutting Medicaid costs. [2] [ better source needed ] [1] PhRMA, the largest political force for the pharmaceutical industry, estimated that MFN pricing for Medicaid would cost the industry $1 trillion over the next decade. Stephen Ubl, the group's leader, particularly opposed the re-importation expansion. [1] [2] He said, "importing foreign prices from socialist countries would be a bad deal for American patients and workers". [2] PhRMA did support Trump for targeting other countries that they believe are not paying enough for drugs. [2]
AARP released a statement supporting the new EO, [2] but the Wall Street Journal called out that important details were missing on how it could be implemented. [10] Pharmaceutical industry executives and Republican representatives warned that reducing drug prices could stifle innovation. [11] [12]
In a follow up interview, HHS Secretary Robert Kennedy stated he expects price reductions to apply to Medicare and private markets. [13] On May 20, HHS released follow up guidance, "The MFN target price is the lowest price in an OECD country with a GDP per capita of at least 60 percent of the U.S. GDP per capita." [14] [15] It is unclear how these changes will impact the existing agenda for Medicare price negotiations. [16]
A Dutch expert noted that it may be difficult to compare US drug prices to prices paid by European countries as the specific price negotiated for a given drug is often kept secret. [17] The impact on foreign drug manufactures is unclear. [18]
JP Morgan's analyst stated that the new policy would also be difficult to implement due to expected legal challenges. [2]
{{cite news}}: CS1 maint: multiple names: authors list (link) | This article needs additional or more specific categories .(May 2025) |