HHS and CMS Implement MFN Drug Pricing Model Following Executive Order
The U.S. Department of Health and Human Services (HHS) and the Centers for Medicare & Medicaid Services (CMS) have announced the implementation of a Most Favored Nation (MFN) drug pricing model following an executive order intended to reform prescription drug prices. This model sets price targets for pharmaceutical manufacturers based on the lowest prices available in other OECD countries with a comparable economic profile. The policy specifically targets drugs without generic or biosimilar competition and aims to lower drug prices in the U.S., which have historically been higher than in other countries.
The pricing formula involves referencing countries with a gross domestic product (GDP) per capita at least 60% of that of the U.S., setting the target price at the lowest among those nations. Officials from HHS and CMS emphasize that pharmaceutical companies must adhere to these pricing targets or face regulatory actions. The initiative reflects an effort to counteract high drug prices and improve affordability, particularly within Medicare.
Industry groups such as the Pharmaceutical Research and Manufacturers of America (PhRMA) and the Biotechnology Innovation Organization (BIO) have expressed opposition to the MFN policy. They caution that anchoring U.S. drug prices to prices in foreign markets could undermine investment in pharmaceutical innovation and biotechnology sectors, potentially impacting the availability of novel treatments and economic activity within the U.S. The industry argues that factors like pharmacy benefit managers, insurers, and hospitals play significant roles in drug pricing challenges.
On the other hand, advocacy groups like AARP view the policy as a positive step toward price transparency and fairness, highlighting its potential to reduce out-of-pocket costs for seniors. Community pharmacist representatives acknowledge the move may help with affordability but question the authority of the executive branch to implement the policy without congressional approval.
The administration has also indicated it may pursue additional measures, including monitoring export programs, if pharmaceutical manufacturers do not comply with established prices. Observers expect legal challenges from stakeholders questioning the extent of executive authority in enforcing such pricing reforms. This policy represents a significant development in U.S. drug pricing regulation with potential widespread implications for payers, providers, and pharmaceutical manufacturers.