Can the U.S. Most-Favored-Nation Model Transform Drug Pricing?

Did you know that Americans pay almost three times more for the exact same medicines, often made in the exact same factories? For a long time, drug manufacturers have discounted their products to access foreign markets, while charging enormously high prices in the U.S.  

What is the MFN Model?

The Most-Favored-Nation (MFN) policy, reinstated by the White House in May 2025, promises to align U.S. drug prices to the lowest prices in peer OECD countries. This marks a deviation from the long-standing model where the U.S. paid the highest prices and effectively subsidized global innovation. 

The concept was first proposed in 2020 under the Trump administration, but legal challenges and industry opposition stalled implementation. Its revival in 2025 reflects renewed political momentum to curb drug prices and align them more closely with global benchmarks.

The policy is expected to push domestic prices downward, creating ripple effects across global markets. It will discourage manufacturers as they can no longer rely on the U.S. as the primary source of premium margins. 

To protect their margins, manufacturers may raise prices in Europe and other markets, delay or limit launches in lower-priced countries, and restructure discounts. These adjustments could lead to higher costs abroad, tighter healthcare budgets, and restricted patient access in some regions. At the same time, companies may also place greater emphasis on non-price strategies such as outcomes-based agreements and value-added services to remain competitive.

How Will This Impact U.S. Based Drug Manufacturers?

The MFN framework could significantly reshape the industry business model. As American drugmakers tie prices to lower benchmarks abroad, they will likely reduce their margins on patented drugs, constrain revenue streams, and in turn shrink the pool of funds available for research and development (R&D). This is especially concerning for high-cost areas like rare diseases and cell and gene therapies, where investment risk is already substantial. 

Additionally, U.S. manufacturers may rethink launch sequencing—prioritizing higher-priced regions before introducing new drugs in the domestic market or in countries that could serve as reference points for MFN pricing.

What Does It Mean for the Rest of the World?

Price Adjustments Abroad 

Manufacturers may increase prices in traditionally lower-cost markets to offset revenue losses in the U.S. Eli Lilly, the US pharmaceutical company, plans to raise the UK list price of its weight-loss drug Mounjaro by 170%, from £122 to £330, starting in September 2025. The increase is intended to “re-balance” European pricing in response to most-favored-nation (MFN) pressures. The price jump sparked a surge in demand, leading Eli Lilly to temporarily suspend UK shipments in August 2025 to prevent stockpiling ahead of the hike. 

Policy Lobbying  

Pharma companies may intensify lobbying efforts to revise single-payer pricing rules in Europe, Japan, and China, potentially leveraging U.S. Trade Representative (USTR) support to push for higher reimbursement levels abroad.

Market Access Risks

Countries included as MFN reference points may make their drug pricing less transparent to avoid being benchmarked or even implement retaliatory pricing policies against the U.S. Manufacturers, in turn, may withhold certain drugs from lower-profit or reference markets to prevent triggering MFN-based discounts.

Operational and Compliance Challenges

Implementing MFN in the U.S. presents unique difficulties. Unlike many countries, the U.S. lacks strict price caps or a centralized health technology assessment (HTA) body to evaluate drug value. This makes enforcement and compliance more complex. 

Although June 11, 2025, was the formal deadline for drugmakers to engage in price discussions with HHS, progress has stalled amid legal uncertainties. At present, MFN appears less like a fully executable policy and more like a political tool signaling intent to reshape pricing norms.

The Future Outlook

If implemented effectively, MFN could trigger a fundamental shift toward coordinated international pricing strategies, with greater emphasis on risk-sharing and outcomes-based contracts. Drugmakers and payers alike may need to negotiate agreements that account for cross-border consequences, balancing affordability with incentives for innovation. Whether MFN delivers sustainable cost savings or sparks unintended distortions will depend on how regulators, manufacturers, and global health systems adapt in the coming years.

Additional Read: Drug Prices Are Rising. Can Your Supply Chain Hold the Line?

References

1. Delivering Most-Favored-Nation Prescription Drug Pricing To American Patients
2. Global Pricing Ripple Effects of the U.S. MFN Policy
3. Donald Trump’s drug plan risks higher medicine prices in Europe
4. ‘Most Favored Nation’ Policy Could Have Profound Impact on Global Drug Pricing if Fully Implemented
5. Most Favored Nation Clause: Why Revising Differential Pricing May Be Wiser Than Importing Global Prices
6. Understanding the U.S. ‘most favored nation’ executive order and implications for pharma
7. The Trump Administration’s US Drug Pricing Proposal – What will happen next?
8. Eli Lilly temporarily halts UK shipments of weight-loss drug Mounjaro