Summary
An executive order from the Trump administration has reintroduced the “most favored nation” (MFN) policy, which aims to cut drug costs by aligning U.S. prices with those of other countries. The mandate lacks specifics on execution and enforcement, injecting even more uncertainty into the pharmaceutical market
An executive order from the Trump administration has reintroduced the “most favored nation” (MFN) policy, which aims to cut drug costs by aligning U.S. prices with those of other countries. The mandate lacks specifics on execution and enforcement, injecting even more uncertainty into the pharmaceutical market.
The Department of Health and Human Services (HHS) has 30 days to define how the policy will work in practice. At first, compliance by pharma manufacturers will be voluntary, but the order outlines the potential for rulemaking if prices do not meet targets.
While nearly everything about the implementation is unknown, pharma companies must brace for impact.
Policy Intent vs. Patient Impact
The MFN policy’s effectiveness is widely debated. In its current form, the executive order is unlikely to deliver immediate savings to patients, and one industry group projects it will cost drug manufacturers $1 trillion.
In the U.S., out-of-pocket costs are determined by insurers and pharmacy benefit managers (PBMs) through benefit designs that typically remain fixed. Even if list prices drop, the patient cost will remain unchanged. Without changes to how coverage is structured across the system, price cuts at the manufacturer level will do little to ease what patients actually pay.
The executive order also promotes direct-to-consumer (DTC) pricing channels. The model could make some medications more affordable for certain patient populations, specifically those without insurance or who were denied coverage. However, the overall reach is narrow; DTC prices will still be unaffordable for many, if not most, patients.
Manufacturers’ ability to recoup revenue losses from U.S. price reductions is extremely limited. In many developed countries, drug pricing is governed by rigid regulatory frameworks and interdependent pricing structures. Governments strictly control the mechanisms that trigger increases. As a result, manufacturers cannot easily raise prices in other countries to compensate for lower prices in the U.S., potentially leading to revenue losses.
Additional administrative complications arise from the MFN policy. The FDA will have to reconcile differently packaged, approved and formulated drugs across international markets so that price comparisons can be made.
The federal policy may also collide with state-level activity. If states continue forming affordability boards, like the one in Colorado, we could see parallel systems that create significant compliance burdens.
Advice for Manufacturers
Rather than waiting for concrete details, pharma manufacturers’ best course of action is to prepare as if the policy will move forward. Now is the time to invest in infrastructure that supports pricing transparency, AI-powered analytics, and real-time market access strategy planning.
The first priority is to acquire visibility into global pricing and product volume in comparable international markets. Most U.S.-based pricing teams haven’t needed this level of insight before. Aligning with international reference pricing requires access to price lists as well as a clear understanding of how those prices were set, under what regulations, and in what market contexts.
Global visibility requires clean, centralized data. Integrating internal systems allows companies to consolidate international and domestic pricing for better risk analysis, pricing strategies, and regulatory compliance.
Manufacturers should also reassess the terms and durations of their market access contracts. Evaluate whether longer-term agreements provide necessary stability or whether shorter, more flexible arrangements may be more advantageous in this current environment.
While the executive order raises more questions than it answers, its potential to reshape drug pricing is real. For manufacturers, this is a moment to build agility.
This article was originally published on Pharmiweb.com
