Executive Summary
The Trump Administration has designed a Most-Favored-Nation (MFN) drug pricing policy framework to address the major differences in drug prices and contributions to the pharmaceutical innovation enterprise across developed countries. To date, the Administration has reached voluntary MFN pricing agreements with 17 of the largest pharmaceutical manufacturers in the world. Moving forward, the Administration expects to reach similar agreements with most manufacturers of sole-source brand name drugs and biologics in the nation. In parallel, the Administration is working with Congress to codify those voluntary agreements into law to ensure that patients continue to benefit from price discounts. This report describes the MFN drug pricing framework and evaluates its fiscal effects.
MFN provisions differ between future drug launches ("prospective MFN") and drugs on the market before MFN began ("existing drugs"). Under the voluntary MFN framework, manufacturers will offer all new drugs launched in the U.S. at prices comparable to those in other high‑income countries.1 This prospective MFN construct applies across all markets in the U.S., inclusive of the private insurance market, and is expected to generate $529B in domestic savings in the next 10 years across all markets. By tying U.S. drug prices to international prices, prospective MFN will lower U.S. prices and put upward pressure on prices paid in other wealthy nations.
The voluntary MFN framework requires manufacturers to make existing drugs available to state Medicaid programs at MFN prices, which would generate $64.3B in federal and state savings in the next 10 years. Discounted prices offered in the direct-to-consumer channel, TrumpRx.gov, will generate large patient savings for prescription drugs commonly purchased outside of insurance, including glucagon-like peptide-1 (GLP-1) drugs for weight loss and fertility medications. Specifically, GLP-1 users without insurance coverage are expected to save $3,000 per year, and couples undergoing in-vitro fertilization are anticipated to realize savings exceeding $6,000. In addition to the voluntary MFN framework, proposed legislation would ensure that health insurers count direct-to-consumer purchases of drugs at MFN prices towards patients' deductibles and out-of-pocket maximums. Finally, as part of the voluntary MFN framework, the Trump Administration secured price reductions for GLP-1 drugs, hereby enabling a fiscally sustainable expansion of Medicare coverage for anti-obesity treatments.
The MFN drug pricing policy framework has been carefully designed to work in tandem with U.S. trade policy efforts. While U.S. trade policy pushes foreign governments to pay their fair share, U.S. pricing commitments provide drug manufacturers with complimentary leverage in their negotiations with other wealthy nations. Taken together, the MFN framework aims to equalize drug prices through the combination of decreases in U.S. prices and increases in prices faced by other developed countries.
