Will most-favored-nation pricing lower prescription drug costs? 

President Trump has signed an executive order aimed at implementing Most-Favored-Nation pricing for prescription drugs – meaning US purchasers pay no more than the lowest price that drug manufacturers receive in other similar countries. It’s the administration’s latest effort to reduce the cost of prescription drugs for Americans.  

The executive order directs government officials to take action – it does not require immediate action from employer group health plans.  

Three key issues are addressed: 

• Pegging US prices to global prices through most-favored-nation pricing. Government officials have until June 11 to establish MFN pricing targets and communicate those targets to drug manufacturers. If the MFN pricing targets do not lead to “significant progress” in achieving MFN pricing, then the Secretary of Health and Human Services would propose a rule to implement MFN pricing, to the extent permitted by law. Similarly, other agencies would be directed to take other measures to significantly reduce the cost of prescription drugs and end anticompetitive practices. 
• Direct-to-consumer purchasing. The Secretary of Health and Human Services is tasked with facilitating direct-to-consumer purchasing programs that enable Americans to purchase their medications directly from pharmaceutical manufacturers at MFN prices.  
• Addressing below-market pricing in other countries. Government officials have been tasked with ensuring other countries are not engaged in practices that result in higher drug prices for Americans. 

How will it work?

The executive order demonstrates the administration’s focus on lowering drug costs for Americans, but there many open questions:  

• Are the MFN prices just for Medicare and Medicaid? 
• How will prices for commercial plans be affected? 
• Does “facilitate direct-to-consumer purchasing programs” mean expanding the programs in existence today?  
• Will the administration adjust for variances in drug prices due to differences in the health systems of the benchmark countries and the US? Countries with national health systems may approach drug pricing differently. For example, there may be very limited access to certain drugs that are freely available in the US.  
• What pricing changes represent “significant progress”? 
• From a practical perspective, will MFN pricing targets be determined for a limited number of drugs at the outset, with additional drugs phased in over time?  
• How does this executive order coordinate with previous statements from the administration suggesting that tariffs may be levied on pharmaceutical products? 

Given these and other questions not addressed in the executive order, its potential impact and the timeline for change are unclear. We may see legal challenges to the executive order. It is worth noting that the first Trump administration proposed a similar initiative regarding MFN pricing for pharmaceuticals, but those efforts were blocked in court and ultimately rescinded by the Biden administration. 

What’s next?

At this point, no direct action from employers is needed. The effect on US companies offering prescription drug benefits remains uncertain at this early stage. We’ll be providing updates here as details emerge.