In the ongoing debate over soaring prescription drug costs in the United States, one policy proposal has gained significant attention: the so-called Most Favored Nation (MFN) drug pricing policy. Designed to align U.S. drug prices with those paid in other developed nations, the MFN model aims to reduce government spending and out-of-pocket costs for patients. However, while the idea may appear promising on the surface, it carries potentially significant negative implications for the pharmaceutical and biotechnology industries, raising concerns about innovation, global pricing dynamics, and long-term access to therapies. In a recently issued Executive Order (EO), the MFN policy would require Medicare to pay no more for certain prescription drugs than the lowest price paid by other wealthy nations. This policy targets high-cost drugs administered through Medicare Part B (typically those given in clinical settings, such as cancer treatments and injectable biologics). The order was more aggressive and sweeping than Trump’s previous attempt to set U.S. drug prices based on what other countries pay, seeking to lower drug prices for all Americans, not just those in government programs. The EO was accompanied by a fact sheet . The underlying rationale is simple: U.S. consumers and taxpayers often pay significantly more for brand-name drugs than those in countries like Germany, the United Kingdom, or Canada. These countries negotiate drug prices directly with manufacturers or cap them by law, leading to prices far below what is charged in the U.S. By linking U.S. prices to these lower international benchmarks, proponents argue the government could save billions annually and increase affordability for patients. As just announced, the Department of Health and Human Services (HHS) will aim to negotiate drug prices down to the lowest prices paid by peer nations, and the pricing targets will apply to brand-name drugs that don’t face competition from generics or biosimilars. The HHS announcement still leaves plenty of questions unanswered, such as the specific consequences for companies that don’t lower their prices. Unclear too is what prices the companies will be asked to lower since drugs sold in the U.S. do not have a single price — different commercial insurers, Medicaid, and Medicare may all face different costs. What they pay is not necessarily connected to how much a patient out of-pocket at the pharmacy. Generally, the MFN policy poses several risks that could undermine the financial and innovative foundations of the life sciences sector: Reduced Incentives for Innovation Pharmaceutical R&D is a high-risk, high-investment endeavor. It typically costs billions of dollars and over a decade of research to bring a single drug to market. The U.S. market—due to its high prices and large volume—provides the lion’s share of global drug profits. If prices are forcibly lowered to match those of other countries, companies may be less inclined to invest in high-risk drug development projects, particularly in rare diseases and complex biologics. Market Distortions and Global Repercussions MFN pricing could have unintended international consequences. Since U.S. prices would be pegged to the lowest global prices, pharmaceutical companies might respond by raising prices abroad to prevent those lower prices from influencing the U.S. benchmark. This could lead to decreased access and affordability in less wealthy nations, potentially exacerbating global health disparities. Disruption to Pricing and Access Strategy The policy undermines the industry's ability to use tiered pricing strategies that allow drugs to be more affordable in lower-income countries. It may also discourage early launches of new therapies in price-sensitive markets out of concern that those prices could later affect the U.S. MFN calculation. Impact on Small Biotech Firms Smaller biotechnology companies, which rely heavily on favorable investor sentiment and future revenue projections, may find it harder to secure funding if the potential for U.S. pricing premiums disappears. This could stifle innovation pipelines before they even reach the clinical trial phase. Regulatory and Legal Challenges The MFN model would represent a significant shift in how Medicare operates, possibly necessitating new legislation or facing legal pushback from stakeholders. The complexity of comparing international prices—each with unique healthcare delivery systems, volume agreements, and confidential rebates—adds further complications to implementation. The MFN policy is a very bad attempt to address the longstanding issue of high drug prices in the U.S. healthcare system. While its potential to reduce costs for Medicare and patients would be substantial if proven true, the broader economic and innovation-related consequences for the pharmaceutical and biotechnology industries would be catastrophic. Experts at the University of Southern California Schaeffer Center explained in a recent op-ed the policy could be easily gamed, firms may pull out from overseas markets and pricing decisions will be based on foreign governments that value health advancements differently. Others argue that President Donald Trump’s EO to lower drug prices using a MFN policy lacks a clear legal basis and say the administration is likely to pursue the policy through an experimental Center for Medicare & Medicaid Innovation (CMMI) model. But even that approach would likely face legal challenges under the Supreme Court’s Loper Bright decision which curtailed agencies’ interpretive authority. The debate surrounding MFN pricing underscores the challenge of designing healthcare policy that balances affordability with the need to foster continued advancement in life-saving treatments. MichBio has conveyed this reality to our congressional delegation and also signed on to a letter from the Council of State Bioscience Associations (CSBA) addressed to the leadership in the U.S. Senate and House. Incubate, a 501(c)(4) organization of venture capital firms representing the patient, corporate and investment communities, issued a press statement and brief that lays out the biotech ecosystem’s concerns. Similarly, We Work for Health , an organization that brings together national and local business leaders, labor, biopharma, patient advocacy, and other healthcare-related stakeholders, has a new piece on the MFN price control policy. Many other media sources have written extensively on the consequences of these types of foreign price controls will have on American jobs, leadership in innovation, and patient choices and access. In a related manner, Sens. Josh Hawley (R-MO) and Peter Welch (D-VT) introduced the Fair Prescription Drug Prices for Americans Act ( S. 1587 ) which would require that prescription drug and biological product retail prices cannot exceed the average retail list price of certain other nations, following an “international price index” model – see their press release . Separately, Sens. Jeff Merkley (D-OR), Peter Welch (D-VT), and Bernie Sanders (I-VT), along with Rep. Debbie Dingell (D-MI) introduced the End Price Gouging for Medications Act (S. 1753; H.R. 3391). The bill would require drug companies to offer medications sold in the U.S. at no more than the lowest price drug in twelve peer nations, including Australia, Canada, France, Germany, and the UK – see the Press Release . MichBio, along with its state and national partners, is hopeful that all federal policymakers will prioritize the true drivers of unaffordability across healthcare and pursue policies that will truly reduce patient out-of-pocket costs. Instead, we hope they will refrain from invoking the MFN policy and thereby imperil the vitality of the U.S. life sciences ecosystem.