President Donald Trump loves a deal, but Most Favored Nation drug pricing isn’t a good one for anyone.
In May 2025, the White House announced a ‘Most Favored Nation’ approach for setting prescription drug prices. The order aims to align U.S. prices with those paid in peer countries and directs federal agencies to pursue both voluntary and regulatory steps to make it happen. The administration’s fact sheet presents this as an end to foreign free riding and delivering the best deal to Americans. We all know President Donald Trump loves selling “a deal,” and while the framing is appealing, it could all go very wrong for patients in the healthcare system.
HHS has since outlined MFN pricing targets that would pull U.S. list prices toward the likes of Denmark, Canada and Australia, disregarding that these nations have socialized medicine systems, much smaller populations and prescription drug patient pools. None of these countries have anywhere near the breadth of R&D innovation that the U.S. is known for, either.
Besides putting new pressure on corporate balance sheets, Most Favored Nation drug pricing would inevitably alter what gets invented and where new medicines get launched. Innovation responds to expected returns, so when governments cap prices, the expected revenue takes a plunge, and investment holds onto its limited capital.
It’s not a mystery as to whether tighter price controls reduce the number of drug launches and lengthen delays. Patricia Danzon and Wharton School colleagues have documented how countries with suppressed price points and smaller markets experience worse outcomes on quality and quantity. Prices are artificially made lower, but to what end?
What makes American medicine so powerful and sought after is the wider realm of the possible. Recent modeling by University of Chicago researchers confirms yet again that broad U.S. price controls would reduce R&D investment and result in significantly fewer future approvals. The Congressional Budget Office reached the same conclusion.
Critics of economic reality will point to tragic deaths when patients can’t afford certain drugs, but they ignore the life and death “opportunity costs” of medical breakthroughs never being realized.
This matters because the United States remains the global engine of new therapies. The FDA cleared 50 novel drugs in 2024, including first-in-class treatments that went through long and costly development cycles. Patients benefit when the world’s leading launch market incentivizes investment, and suffer when politics corrupts pricing.
European data show long and uneven waits for reimbursement after approval, with many innovative medicines unavailable or restricted years after they’re authorized. Americans should consider this fact with great caution.
There is also a misdiagnosis of the problem happening. A significant share of what patients pay is driven by intermediaries that thrive on the spread between the list and net prices. The Federal Trade Commission’s 2024 interim report and a 2025 follow-up describe how dominant pharmacy benefit managers (PBMs) inflate costs, steer patients, and block lower-cost competitors from the market. If policymakers want immediate relief at the counter, it’s an easier target with quicker payoff for patients.
After cracking down on PBMs, the U.S. could employ outcomes-based contracts to pay for value rather than volume on drugs. The CBO has outlined several of these options and their trade-offs without resorting to blunt force price caps that spook investors. A group of 18 senators has asked the Office of the U.S. Trade Representative to exercise pressure on America’s trade partners in order to have them pay their fair share for drugs and drug development. This is a better and more innovation-friendly way to bring drug prices down stateside than just racing to the bottom.
Even manufacturers are exploring ways to eliminate middlemen and deliver lower prices without compromising R&D. The prospect of direct-to-consumer sales for some medicines is one such idea that now gets openly discussed by major firms in response to MFN pressure. That is a debate well worth having on its own merits.
Policymakers tend to live in the realm of short-term thinking based on election cycles, but we need them to find a balance between the immediate pressures of sticker shock and incentivizing the next generation of therapies. MFN pricing accomplishes none of this. Congress should keep its distance on codifying these proposals into law.
