Executive Summary
The Trump Administration has introduced a Most-Favored-Nation (MFN) drug pricing policy to tackle significant disparities in drug prices and contributions to pharmaceutical innovation among developed nations. So far, the Administration has secured voluntary MFN pricing agreements with 17 leading pharmaceutical companies globally. Looking ahead, the Administration anticipates forming similar agreements with most producers of sole-source brand name drugs and biologics in the U.S. Concurrently, efforts are underway with Congress to formalize these voluntary agreements into law, ensuring ongoing patient access to price reductions. This report outlines the MFN drug pricing framework and assesses its financial impact.
The MFN policy includes distinct provisions for future drug launches (“prospective MFN”) and drugs that were already on the market prior to the policy’s implementation (“existing drugs”). Under this framework, manufacturers will price all new drugs introduced in the U.S. at levels comparable to those in other high-income countries. This prospective MFN model is applicable across all U.S. markets, including the private insurance sector, and is projected to save $529 billion domestically over the next decade. By aligning U.S. drug prices with international levels, this policy is expected to reduce U.S. prices while increasing those in other affluent countries.
For existing drugs, the MFN framework mandates that manufacturers offer these at MFN prices to state Medicaid programs, which is projected to save $64.3 billion in federal and state funds over the next ten years. Additionally, the direct-to-consumer platform TrumpRx.gov will provide significant savings on prescription drugs frequently purchased without insurance, such as glucagon-like peptide-1 (GLP-1) drugs for weight loss and fertility medications. GLP-1 users without insurance could save $3,000 annually, while couples undergoing in-vitro fertilization might save over $6,000. Proposed legislation would also ensure that health insurers recognize direct-to-consumer drug purchases at MFN prices in their deductible and out-of-pocket calculations. Furthermore, as part of the MFN framework, the Trump Administration has achieved price reductions for GLP-1 drugs, facilitating a financially viable extension of Medicare coverage for anti-obesity treatments.
The MFN drug pricing policy is thoughtfully designed to complement U.S. trade policy. As U.S. trade policy encourages foreign governments to contribute fairly, U.S. pricing commitments offer drug manufacturers additional leverage in their negotiations with other wealthy nations. Collectively, the MFN framework aims to balance drug prices by decreasing U.S. prices while increasing those in other developed countries.
