The so-called ‘Most Favored Nations’ rule would set drug pricing for Medicare in line with the prices paid by other nations, where drugs can be much cheaper.
President Donald Trump is considering a proposal to lock in drug prices at the rates paid in other countries, a possibility that could be an “existential threat to the industry,” Reuters reported on Tuesday afternoon.
Companies with the most exposure to such a policy include Bristol Myers Squibb, Amgen, Pfizer and Gilead, according to Leerink Partners. On the flip side, Novartis, AstraZeneca, Roche, Sanofi and Merck have the lowest exposure.
Referred to in a previous iteration as the “Most Favored Nations” rule, such a policy would set drug pricing for Medicare in line with the prices paid by other nations. The U.S. tends to pay as much as three times more for drugs than other countries. Trump had tried to bring in such a rule during his first term, but it was eventually blocked by a court. Now, according to two anonymous sources who spoke with Reuters, the policy is back on the table.
Meanwhile, European pharmas are lobbying to increase drug prices in the region, according to a letter from the CEOs of Novartis and Sanofi published in the Financial Times on Wednesday. Novartis’ Vas Narasimhan and Sanofi’s Paul Hudson argued that price controls in the European Union are stifling medical innovation and making the region unattractive to investment. The U.S. and China, on the other hand, are actively encouraging investment. The CEOs asked for prices in the EU to be “within the range of U.S. net prices,” with rebate adjustments.
While the exact details of Trump’s drug pricing proposal are unclear, Leerink provided three scenarios for how the administration could bring back the plan. It could incorporate international drug pricing into negotiations for the Inflation Reduction Act process for drugs in the 2028 and later timeframe; conduct a CMS Medicare demonstration project; or pursue new legislation, possibly by revising the existing IRA law. The Trump administration could also create entirely new legislation.
A select group of drugmakers have already been included in drug pricing negotiations under the IRA, which was passed by former President Joe Biden in an effort to lower drug pricing. The law has proven extremely controversial in the industry, which has fought back with numerous lawsuits. Opponents got a key win last week when Trump indicated support for removing the “pill penalty,” which gave a shorter time for small molecule drugs to avoid the negotiations as compared to biologics.
But Trump did not go so far as to propose the elimination of the IRA drug pricing negotiations, instead issuing an executive order to improve the program. The administration is expected to issue draft guidance for the 2028 IRA negotiations by June 15.
As Trump wades into the drug pricing issue once again, he should expect stiff opposition from the industry. Groups like PhRMA have argued that the IRA stifles innovation and undermines access to medicines. The industry group has particularly taken aim at the pill penalty.
PhRMA also lobbied against the Most Favored Nations proposal back in 2020, saying the policy was bad for patients, providers and medical innovation.
The possible drug pricing policy comes as the pharmaceutical industry is facing intense pressure from Trump on tariffs. The president has warned that the import taxes are coming shortly, although the specifics have not yet been revealed. The tariffs could hit generic drugs or innovative therapies. If the latter, pharmas could pass the costs on to consumers.
