The Trump administration is considering resurrecting a prescription drug pricing initiative known as the most favored nation model. This model would tie what healthcare providers are paid for certain medications in the Medicare program to prices in peer countries. It is unclear which prescription drugs would be targeted or how the model would be implemented, whether through executive action or legislation. However, if pursued, it would face significant challenges in terms of implementation.
Earlier this year, there were speculations that the Trump administration might revisit the most favored nation model. Eli Lilly CEO David Ricks had suggested that raising pharmaceutical prices in other wealthy nations could help offset potential price reductions in the U.S. This hinted at the possibility of international price referencing for certain prescription drugs, specifically through a most favored nations model. This model would ensure that healthcare providers are reimbursed no more for high-cost physician-administered drugs than the lowest price drug manufacturers receive in other countries with similar GDP per capita.
In the past, the Department of Health and Human Services had proposed various methods to reduce Medicare prescription drug spending by linking prices of physician-administered drugs to those in other comparable countries. However, these efforts were thwarted in the courts. Nonetheless, there are reports that the Trump administration is once again considering this policy. There are several options that could be explored, including leveraging the Affordable Care Act provision that allows for testing payment models through demonstration projects.
Implementing international price referencing in Medicare would pose logistical and legal challenges. For example, determining how to handle prescription drugs approved by the FDA but not marketed or reimbursed in reference nations presents a significant hurdle. Additionally, setting prices based on international benchmarks could potentially violate the U.S. Constitution’s Commerce Clause.
If international price referencing is implemented, drugmakers may respond by delaying product launches or withdrawing products in certain countries. They could also try to renegotiate contracts with reference countries to increase prices. However, this may be difficult given the budgetary and legal constraints in Europe regarding drug prices. Capping reimbursements based on international pricing could result in lower net prices, potentially leading to cost savings for the Medicare program.
In conclusion, while a most favored nation model could yield cost savings, the Trump administration would face numerous challenges in implementing such a policy. It remains to be seen how this initiative will unfold and whether it will be successful in addressing the complex issue of prescription drug pricing.
