‘Most Favored Nation’ Policy Could Have Profound Impact on Global Drug Pricing if Fully Implemented

• Reference Markets: U.S. drug prices are to be aligned with the lowest price available in any OECD country with a GDP per capita of at least 60% of the U.S. GDP per capita.
• Impacted Drugs: The policy applies to all brand-name prescription drugs that lack generic or biosimilar competition within eligible reference markets.
• Enforcement: HHS expects pharmaceutical manufacturers to voluntarily adjust their U.S. prices to meet these targets. Failure to comply may result in governmental action, including potential price controls and legal measures.

Based on the criteria set by HHS, the OECD countries pictured below in Figure 1 qualify as reference nations for MFN pricing—this list is non-exhaustive.

Figure 1: According to World Bank Group, the United States GDP per capita is approximately $82,769.4. Therefore, 60% of its value is about $ 49,661.64. The following OECD countries have a GDP per capita equal to or exceeding this threshold.

The MFN policy is poised to affect several high-cost medications that currently lack generic or biosimilar competition in reference markets. Examples of qualifying drugs that may be impacted include (but not limited to):

• Keytruda (pembrolizumab): This monoclonal antibody is employed in treating various cancers. Its patent protections extend until 2031 in Europe and 2036 in the U.S., with no biosimilars currently approved.
• Dupixent (dupilumab): Indicated for conditions like atopic dermatitis and asthma, Dupixent remains under patent protection with no biosimilar alternatives available in major markets.

These drugs’ lack competition in potential reference markets and their high costs make them prime candidates for price adjustments under the MFN policy.

If the Most Favored Nation drug pricing plan is fully implemented (as described by HHS), the effects on the U.S. healthcare system and global drug markets could be profound:

• Global Drug Prices: Pharmaceutical companies may attempt to raise drug prices in the EU and other markets to offset U.S. revenue losses.
• Global Policy Response: Qualifying MFN reference countries may adopt less transparent pricing to prevent U.S. reference pricing from impacting their markets. Moreover, these countries could generate their own retaliatory drug referencing policies to match the U.S. (which could trigger a downward spiral for drug prices globally).
• Access to Medications: Some manufacturers may withdraw drugs from low-profit countries, reducing access for patients outside the U.S. Additionally, pre-launched assets may withdraw ex-U.S. launch plans for qualifying reference market to avoid MFN’s reference pricing restrictions.
• Industry Restructuring: Smaller biotech firms, reliant on U.S. sales, may seek partnerships or become acquisition targets for larger pharmaceutical companies.
• Reduced Innovation and Market Opportunity: Lower U.S. drug prices would decrease industry revenue, create global pricing pressure, and limit investment in new drug discover and drug development worldwide.

Despite its ambitious goals, the Most Favored Nation policy is unlikely to succeed in its current form due to significant challenges:

• Legal Barriers: A similar MFN policy targeting Medicare Part B was blocked by a federal judge. Expanding this to Medicaid and private insurance intensifies legal risks.
• Political Resistance: Congress previously considered applying MFN to Medicaid but dropped it from the bill, (which recently passed the House on May 22nd) reflecting divisions.
• Pharma Industry Opposition: The U.S. pharmaceutical industry, represented by PhRMA, warns that MFN pricing could stifle innovation, trigger drug shortages, and lead to legal battles. Moreover, certain aspects of the MFN policy rest on uncertain legal ground, making them ripe for industry-led litigation.
• Investor Skepticism: Following the initial executive order announcement, U.S. pharma stocks initially dipped but quickly recovered, indicating Wall Street doubts about the policy’s feasibility.

While the launch and market reaction to the Most Favored Nation policy is still in its infancy, Certara’s Market Access and Evidence team anticipate the following developments to be likely:

• Most drug manufacturers will not voluntarily comply with HHS’ price targets. Given industry wide resistance and litigation in 2020 as the administration attempted to implement a watered-down version of today’s MFN policy, drug companies will likely be monitoring policy developments and preparing for a legal fight.
• If implemented as written, the policy could trigger a major shift in global pricing strategy, with manufacturers potentially avoiding low-price markets to protect U.S. reference pricing. This action would reduce funds available for R&D, access programs, and support services, while accelerating direct-to-patient models and reducing volume through traditional PBM and health plan channels.
• Smaller pre-commercial companies may avoid ex-U.S. launches to protect U.S. pricing, while larger manufacturers are likely to push harder for higher ex-U.S. prices to preserve global value. As a result, early-stage funding may shrink, limiting smaller innovators’ ability to advance development.
• Regardless of the extent of MFN policy implementation, growing pressure on drug affordability underscores the importance of developing clinically differentiated therapies in high unmet need areas—enabling manufacturers to focus discussions on clinical value rather than price.

The Most Favored Nation drug pricing policy is a bold attempt to lower U.S. drug prices but faces significant legal, political, and industry challenges. If implemented, it could reshape the U.S. and global pharmaceutical markets, with far-reaching consequences for drug prices, access, and innovation. We advise our clients and all drug manufacturers to do the following to optimize their commercial strategy and protect existing business opportunities: