Today I participated in the very interesting ISPOR Health Policy Leadership Exchange (HPLE) in Washington DC on the topic Most Favored Nation (MFN). It raised several important points and I will summarize some of them.
First, US drug prices are much higher than other OECD countries. A 2024 ASPE report stated that “US prices for brand drugs were at least 3.22 times higher than prices in comparable countries”.
Second, the magnitude of the difference in drug prices between the US and Europe is a relatively recent phenomenon. While the US has always paid more than other countries, prices have varied more in recent decades. For example, Berkemeyer et al. (2019) found that:
Before the implementation of comparative effectiveness analysis and collective price negotiations in Germany [in 2011]Net US prices for physician-administered drugs were on average 29.2% higher than in Germany (95% CI = 26.6%-31.7). Following the implementation of the comparative effectiveness assessment and price negotiations in 2011, the difference between US and German prices increased by 28.9% (95% CI = 23.7%–34.3%).
Third, some discussion focused on policy objectives. A unanimous view was that MFN would not dramatically reduce prices in the US (especially out-of-pocket for patients), but that the Trump administration would use MFN as a tool to make countries outside the US pay their fair share toward global pharmaceutical R&D. The rationale for this is that pharmaceutical R&D is a global public good (see Frech et al. 2026), meaning that additional reimbursement leads to greater R&D investment. However, it is unclear to what extent prices outside the US would increase beyond nominal limits as a result of MFN.
Fourth, much discussion has focused on what pharmaceutical companies are likely to do if large differences in reimbursement persist. One presenter claimed that pharmaceutical manufacturers are likely to use at least one of the following three strategies.
- delay. Companies may delay drug launches in countries outside the US, particularly those in the MFN market basket. We have found this to be the case when reference pricing was introduced in Europe. Because reference pricing only works if prices are available in other countries, companies delaying entry would result in MFN reference pricing being a non-issue. However, this would not be a socially optimal solution, because patients who could benefit from the drugs would not receive them (consumer surplus is lost) and pharmaceutical companies would lose revenue from ex-US markets (producer surplus is lost).
- hide. Another approach would be to keep list prices high but keep prices low through secret discounts. Some MFN programs use net prices as part of reference pricing, so these traditional ‘disguise’ approaches (i.e., confidential rebates) may not work. However, there are other approaches to avoid reference pricing, such as giving away free products and outcome-based pricing. For example, let’s say you want to sell a drug for $100 in the US and $50 in Europe. Under MFN, if you sell in Europe for $50, the US price will also be $50. Instead, a pharmaceutical company might sell the drug in Europe for $100, but then give away 50% of the product for free. This would result in a published price of $100 (which would presumably be used for MFN purposes) but an actual price of $50. Or companies will work with payers to create outcomes-based agreements. For example, one might set an outcome-based price of $100 if the drug works, but $0 if it fails, where the ‘failure’ point would be set based on the outcomes expected for the average patient in the real world to get closer to the actual price of $50.
- to confuse. Another approach would be to make MFNs more difficult to enforce. For example, consider the case where you had Drug A and you wanted to sell in the US and Europe. Perhaps you could sell an injectable version of Drug A in the US for $100, but make Drug A in pill form for Europe for $50. While reference pricing is still possible – let’s say if you base it on the average expected annual cost of treatment – it is more challenging administratively and legally to implement.
Overall, there was a very good discussion and I would like to commend ISPOR for organizing a wonderful event.
