In May 2025, President Trump signed an executive order called “Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients,” in an attempt to lower the costs patients pay at the pharmacy counter. The idea is to set government-determined price controls that tie U.S. prescription drug prices to the rates paid by foreign governments. While perhaps well-intentioned, this policy fails to address key issues that increase the costs of medicines for American patients while creating an array of consequences for future medical innovation that threatens patient access to life-saving treatments around the globe.
MFN is a Price Control, Not a Market Reform
The Most Favored Nation policy ties U.S. drug prices to those in countries like Canada or Germany, where prices are set through government negotiation—often at the cost of delayed access and fewer treatment options. Importing these price models means importing their restrictions.
America’s leadership in biopharmaceutical innovation is driven by incentives that MFN threatens. If companies can’t recover R&D costs, they may stop launching or developing new drugs—hurting patients in the U.S. and globally.
MFN Threatens Long-Term Innovation
Bringing a new drug to market takes over 10 years and $2.6 billion. Most of this is funded by reinvested profits.
Cutting U.S. prices to match lower-spending countries could dismantle this system. Research suggests MFN-style controls could mean dozens fewer drug approvals each decade—bad news for patients counting on innovation for rare, chronic, or life-threatening conditions.
MFN Distorts Global Markets & Limits International Access
MFN pressures companies to raise drug prices abroad to offset U.S. revenue loss, potentially sparking trade conflicts and harming international patients.
It also risks violating WTO rules if implemented with retaliatory tariffs or regulatory pressure. Courts already challenged MFN’s legality during Trump’s first term, reinforcing concerns over executive overreach in trade and pricing.
MFN Ignores the Real Middlemen: PBMs
MFN targets what the government pays, not what patients pay. Pharmacy Benefit Managers (PBMs)—the middlemen in drug pricing—often pocket rebates instead of passing savings to patients.
Without PBM reform, patients will still face:
Prices based on inflated list prices
Exclusion of cheaper drugs without large rebates
Preference for expensive drugs that profit PBMs
MFN won’t reduce out-of-pocket costs unless PBM practices are addressed directly.
If policymakers are serious about reducing costs for patients, then it’s time to address the actual causes of inflated pricing without undermining innovation. Here’s how they can do it:
Embrace Competitive Market Forces
More competition means more consumer choice for patients, which naturally leads to lower prices without the need for government price controls.
Ensuring there is a clear and efficient streamline for FDA to accelerate approvals will help bring more drugs and treatment options to market. This will boost competition within the market and help companies recoup R&D costs more quickly, meaning more innovation can come to fruition that will result in more choices in treatment being accessible for patients.
Reform PBMs
If the goal is to deliver lower prices to patients at the pharmacy counter, then PBM reform is essential. Here are a few practical solutions that could be implemented:
Require that all manufacturer rebates or discounts that are negotiated by PBMs be passed directly to patients when they purchase their medications. This will help guarantee that patients actually benefit from the negotiated savings, rather than funding PBM profits.
In order to help hold PBMs accountable for rebates or discounts being passed onto patients, PBMs should be required to disclose the total amount of rebates or discounts collected.
To help alleviate price distortion, consider preventing PBMs from engaging in spread pricing where health plans are charged more than pharmacies are reimbursed. Perhaps PBMs should be paid a flat and transparent service fee that eliminates the hidden markups.
The Most Favored Nation executive order may sound like a good idea in theory, but in execution it’s just policy theater with dangerous consequences. It offers the illusion of savings, but at the expense of future medical breakthroughs and patient access, and without providing any meaningful mechanism to truly lower the prices Americans currently pay for pharmaceuticals.
Rather than importing the worst elements of foreign pricing systems, the U.S. should embrace transparent PBM reform, robust competition, and smart pricing models that reward innovative breakthroughs.
Patients deserve access to today’s medicines and the breakthroughs of tomorrow. Considering MFN puts both at serious risk, we need to choose a better path.
US Affairs Analyst
Research Director
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