18 Aug 2025

As US policymakers seek solutions to rising drug costs, the Most Favored Nation (MFN) pricing approach has resurfaced as a bold, if controversial, proposal. Originally introduced in 2020 and revived through an Executive order in 2025, the MFN clause aims to lower pharmaceutical prices in the US by benchmarking them to those in select Organization for Economic Co-operation and Development (OECD) countries. While the promise of savings is significant, so are the potential risks to innovation, global market dynamics, and patient access.

In a previous whitepaper, we explored the foundational MFN clause, its policy origins, and the broader implications for international reference pricing frameworks. Building on that groundwork, this analysis dives deeper into the evolving MFN landscape—examining two key proposals: the Trump Administration's Executive Order and the bicameral End Price Gouging for Medications Act. We evaluate the methodologies, reference country selections, and the potential impact on drug pricing, revenues, and the future of pharmaceutical innovation.

The MFN Clause: Methodology and Challenges

In May 2025, the US Department of Health and Human Services (HHS), announced that they would take immediate steps to implement President Trump's Executive Order (EO) to align US pricing for all branded products withoutgeneric or biosimilar competition.

As per subsequent announcement regarding the EO proposal, the MFN target would be the lowest price available in an OECD country with a GDP per capita of at least 60% of the US GDP. Analysis of the annual GDP and consumption per capita (OECD 2023) relative to the US, highlights the flaws in this methodology as it results in a reference basket of 25 countries with very different healthcare infrastructure and financing (Table 1).

Table 1: Reference countries identified based on GDP per capita relative to the US

Reference area GDP per capita Percent of US GDP
Luxembourg $142,142 173%
Ireland $125,178 152%
Norway $100,430 122%
Switzerland $90,230 110%
Iceland $79,464 97%
Netherlands $78,306 95%
Denmark $73,725 90%
Australia $73,401 89%
Austria $70,487 86%
Belgium $69,103 84%
Germany $68,195 83%
Sweden $66,118 80%
Canada $64,463 78%
Finland $61,706 75%
France $58,330 71%
United Kingdom $57,915 70%
Italy $57,902 70%
Korea $56,052 68%
New Zealand $53,998 66%
Slovenia $53,950 66%
Israel $53,422 65%
Spain $53,192 65%
Czechia $53,149 65%
Lithuania $50,915 62%
Japan $49,963 61%

Besides the significant differences in the healthcare systems and funding mechanisms in reference countries like Slovenia to the US, this GDP method overlooks the critical aspect of delay in access to medicines in several countries. For example, in Lithuania, 75% of the products that are centrally approved by the EMA are not available (Figure 1), with median time to availability of 859 days (Figure 2).

Figure 1: Breakdown of total availability (%2020-2023)3

Chart

Figure 2: Median time to availability (2020-2023)3

Chart

A More Measured Approach: End Price Gouging for Medications Act (MI-06)-May 2025

Given the inherent flaws in the proposed GDP methodology, we reviewed another bicameral bill “End Price Gouging for Medications Act”, introduced by Congresswoman Debbie Dingell (MI-06) along with Senators Jeff Merkley (D-OR), Peter Welch (D-VT), and Bernie Sanders (I-VT)

This bicameral bill proposes drug companies offer medications in the U.S. at no more than the lowest price per drug in twelve similarly developed countries: Australia, Austria, Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, and the United Kingdom.

Although this bill uses a relatively measured approach in the identification of the reference countries and includes countries more likely to be thought of as peers from a US perspective as our analysis shows the implications on pricing and pharmaceutical revenue are significant.

Figure 3: Countries included in End Price Gouging for Medications Act4

Image - Countries Included in End Price

Analysis of Medicare (End Price Gouging for Medications Act)

To conduct an analysis of the estimated fiscal impact to pharmaceutical manufacturers, we analyzed a subset of high-spend drugs from Medicare Part B and D:

Top 10 Medicare Part B5

Top 25 Medicare Part D6 drugs (10 already negotiated and 15 to be negotiated in 2025)

We excluded 23 drugs based on availability of generics or biosimilar competition or lack of information on pricing in more than half the reference countries. This resulted in a set of twelve drugs for further analysis (Table 2).

Table 2: Medicare Part B and Part D Drugs for Analysis

Medicare Brand name (INN)
Part B Keytruda (pembrolizumab)
Part B Opdivo (nivolumab)
Part B Orencia (abatacept)
Part B Tecentriq (atezolizumab)
Part B Ocrevus (ocrelizumab)
Part B Entyvio (vedolizumab)
Part D Imbruvica (ibrutinib)
Part D Entresto (sacubitril/valsartan)
Part D Ozempic (semaglutide)
Part D Xtandi (enzalutamide)
Part D Ibrance (palbociclib)
Part D Calquence (acalabrutinib)

INN - international non-proprietary name

We gathered ex-factory prices for all countries proposed in the reference basket of the bicameral bill from national pricing and reimbursement bodies (data collection May/June 2025)7-23. Specific deductions were applied to adjust reported prices to the ex-factory level when originally provided at the public or pharmacy purchase price level (see Table A1, Appendix) 24. Exchange rates were derived using quarterly averages from March to June 2025, published by OANDA (see Table A2, Appendix)25.

To gain a comprehensive understanding of the revenue implications for pharmaceutical companies, US and ex-US sales data for each of the medications being analysed was sourced from manufacturer's FY 2024 annual reports 26-35. Lowest price for each of the medications in the reference countries was used as the MFN price. Comparison was made to Maximum Fair Prices ("MFP") negotiated by CMS under IRA for those Medicare Part B drugs that have completed negotiations. Percentage difference of MFN price relative to current US WAC was calculated (Table 3) along with absolute and percent decline in US and global revenue based on US price reduction alone (Table 4).

Impact of the MFN Clause on US Pricing and Revenue (End Price Gouging for Medications Act)

The IRP approach proposed in the bicameral bill reduced current US prices by 67% to 93% with MFN being consistently driven by lower Australian and Japanese prices.

Comparing the MFP negotiated by CMS36 with the MFN methodology, suggests the discounts would have been far heftier if MFN was applied during IRA negotiations. For example, with MFN, the negotiated discount on Imbruvica would be 79% vs 38% negotiated under IRA and Entresto would be 92% instead of 53%.

Table 3: Percent difference of MFN price relative to current US WAC

Brand name (INN) Difference from Current US WAC
Keytruda (pembrolizumab) -75%
Opdivo (nivolumab) -72%
Orencia (abatacept) -91%
Tecentriq (atezolizumab) -67%
Ocrevus (ocrelizumab) -76%
Entyvio (vedolizumab) -88%
Imbruvica (ibrutinib) -79%
Entresto (sacubitril/valsartan) -92%
Ozempic (semaglutide) -93%
Xtandi (enzalutamide) -88%
Ibrance (palbociclib) -90%
Calquence (acalabrutinib) -71%
Imbruvica IRA MFP discount = 38%
Entresto IRA MFP discount = 53%

Although price reduction and savings to the US healthcare system is the overall goal of MFN, and this analysis shows this bill would successfully achieve significant savings, the consequences on company revenues and long-term implications for R&D, innovation and patients’ needs to be factored into the conversation.

The US market accounts for a substantial proportion of global sales of pharmaceuticals (Average: 65% , Range 48% to 75%) . A price decline in the range noted in Table 3 would reduce revenue by 50% from ~$97B in global sales to ~$47B based on US price drop alone. This does not consider countries that reference the US in their price setting (e.g., Japan) which would have an additional domino effect on global sales.

Furthermore, in a majority of these markets, the visible ex-factory prices (gross prices) are notably higher than the negotiated net prices. For example, average discounts for injectable oncology therapies in Germany is ~32% and in Italy is ~ 55%37. The impact of MFN if net prices are referenced would be dramatic.

Table 4: Impact of MFN on US and global sales (reported in millions)

Brand Name US sales (2024) Global sales (2024) US sales if MFN applied Global sales if MFN applied % US sales loss if MFN applied % Global sales loss if MFN applied
Keytruda
(pembrolizumab)
 $17,872 $29,482 $4,485 $16,095 75% 45%
Opdivo
(nivolumab)
 $5,350 $9,304 $1,500 $5,454 72% 41%
Orencia
(abatacept)
 $2,770 $3,682 $251 $1,163 91% 68%
Tecentriq
(atezolizumab)
 $2,151 $4,441 $715 $3,005 67% 32%
Ocrevus
(ocrelizumab)
 $5,879 $8,228 $1,428 $3,777 76% 54%
Entyvio
(vedolizumab)
 $546 $801 $63 $318 88% 60%
Imbruvica
(ibrutinib)
 $625 $848 $129 $352 79% 58%
Entresto
(sacubitril/valsartan)
 $4,052 $7,822 $319 $4,089 92% 48%
Ozempic
(semaglutide)
 $12,883 $18,412 $924 $6,454 93% 65%
Xtandi
(enzalutamide)
 $4,074 $6,295 $479 $2,699 88% 57%
Ibrance
(palbociclib)
 $2,849 $4,367 $287 $1,805 90% 59%
Calquence
(acalabrutinib)
 $2,190 $3,129 $634 $1,573 71% 50%
Total: $96,811 $46,784 Average: 82% Average: 53%

The Road Ahead: What Would MFN Mean for the Future of Pharma

Our analysis suggests considerable revenue losses, even under a conservative approach that incorporates only a limited subset of reference countries and disregards the broader repercussions of U.S. price reductions on other markets, despite the interdependencies inherent in international reference pricing frameworks.

The proposals being discussed potentially have significant implications for innovation, investment into pharmaceuticals, global launch decisions and management of price corridors. A multitude of business and ethical questions arise.

Would lower ROI stifle innovation and reduce investment in R&D?

Would R&D and manufacturing shift to lower-priced markets, and how would that align with onshoring promises in tariff negotiations?

Would patients worldwide be better off, or would limited access to novel therapies—especially in lower-income or price-referenced countries—be catastrophic?

In an effort to protect US revenues, could manufacturers begin to alter their global launch strategies by:

Withholding product launches in the countries included in the reference basket?

Delaying launches in those markets to minimize pricing exposure?

Increasing list prices in reference countries while reinforcing confidentiality around net prices?

Some of these thoughts have already been expressed by Pfizer's CEO Albert Bourla38,39 among other important players in the pharmaceutical industry:

I don't think we will remove our products from the markets there - we will just remove them from reimbursement. We will leave them in open market. But as a concept that the country should spend a percentage of their GDP per capita, as, for example, they have requested for defense in NATO. So, you need to spend 5% of your GDP into, let's say, defense, a mechanism that everyone should have a percentage that they spend on innovative medicines. And then, of course, every country can decide how they want to allocate that.

Pharmaceutical Research and Manufacturers of America (PhRMA) president and CEO Stephen J. Ubl has echoed similar views40:

To lower costs for Americans, we need to address the real reasons U.S. prices are higher: foreign countries not paying their fair share and middlemen driving up prices for U.S. patients. Importing foreign prices from socialist countries would be a bad deal for American patients and workers. It would mean less treatments and cures and would jeopardize the hundreds of billions our member companies are planning to invest in America - threatening jobs, hurting our economy and making us more reliant on China for innovative medicines.

Prior assessments comparing prescription price distributions in the United States and abroad are misleading, largely because they focus on the 7% of prescriptions that are the most expensive. In reality, 93% of U.S. prescriptions are filled with generics, giving American patients access to some of the lowest-priced prescriptions among developed nations - even as brand-name prescription prices remain high to support the innovation that eventually yields those generics.

This analysis shows the significant impact that the MFN concept would have on the biopharmaceutical industry and most likely on subsequent drug development and launches. In addition to the impact, focusing solely on brand costs seems to miss a greater point that the US actually spends less on drugs overall versus other nations because of our systems efficient approval and adoption of generic or biosimilar medicine41.

Although the MFN proposal is in a nascent stage, with many details yet to be fully defined, the debate is rife with industry advocates highlighting the legal and political concerns along with the long-term ramifications of using the proposed approach to reduce prices of medications in the US. Initiatives like the Inflation Reduction Act (IRA) have provided the ramp for using a structured approach to price negotiations and while the MFN clause may be considered as a framework to understand pricing differences, using the lowest price from the reference countries as an absolute benchmark has several unintended consequences.

We will continue to proactively monitor the developments in this space, given their potential to significantly influence market access decisions in the US and globally! For further insights, please feel free to contact us.

Sources

  1. 1. HHS, CMS Set Most-Favored-Nation Pricing Targets to End Global Freeloading on American Patients
  2. 2. OECD Data Explorer – Annual GDP and consumption per capita, US $, current prices, current PPPs
  3. 3. EFPIA Patients W.A.I.T. Indicator 2024 Survey (Published May 2025)
  4. 4. End Price Gouging for Medications Act, May 2025
  5. 5. Medicare Part B Spending by Drug: https://data.cms.gov/summary-statistics-on-use-and-payments/medicare-medicaid-spending-by-drug/medicare-part-b-spending-by-drug
  6. 6. Medicare Part D Spending by Drug: https://data.cms.gov/summary-statistics-on-use-and-payments/medicare-medicaid-spending-by-drug/medicare-part-d-spending-by-drug
  7. 7. Australia: The Pharmaceutical Benefit Scheme (PBS) https://www.pbs.gov.au/info/industry/pricing/ex-manufacturer-price
  8. 8. Austria: Reimbursement code https://www.sozialversicherung.at/cdscontent/?contentid=10007.844498&portal=svportal
  9. 9. Austria: Health Technology Assessment https://hta.lbg.ac.at/
  10. 10. Belgium: Belgian Centre for Pharmacotherapeutic Information (CBIP) https://www.cbip.be/fr/chapters
  11. 11. Canada: Ontario Drug Formulary https://www.ontario.ca/page/exceptional-access-program-drug-formulary/
  12. 12. Canada: Ontario Exceptional Access Program https://www.ontario.ca/page/exceptional-access-program-product-prices
  13. 13. France: Official Journal of the French Republic (JORF) Legifrance https://www.legifrance.gouv.fr/
  14. 14. France: Thériaque https://www.theriaque.org/apps/recherche/rcp.php?type=rcp&rcp_fiche_rcp=/accueil.php
  15. 15. Germany: Lauer Taxe https://portalgelmauergermcom/LF/Seiten/Verwaltung/Kundencenter/l.aspx
  16. 16. Italy: Agenzia Italiana del Farmaco https://www.aifa.gov.it/elenco-dei-farmaci-di-classe-A-e-H Agenzia Italiana del Farmaco (aifa.gov.it)
  17. 17. Japan: Kegg Medicus https://www.kegg.jp/medicus-bin/search_drug?
  18. 18. Netherlands: Dutch Healthcare Institute https://www.medicijnkosten.nl/
  19. 19. Sweden: https://www.fass.se/LIF/product?userType=0&nplId=201708010001358&docType=30
  20. 20. Sweden: Tandvårds- och läkemedelsförmånsverket (TLV) https://www.tlv.se/
  21. 21. Switzerland: https://www.spezialitaetenliste.ch/ShowPreparations.aspx?searchType=SUBSTANCE
  22. 22. United Kingdom: NHSBA dm+d https://dmd-browser.nhsbsa.nhs.uk/
  23. 23. United States: Price Rx https://www.wolterskluwer.com/en/solutions/medi-span/price-rx
  24. 24. Foreign price comparison: Deduction and manufacturer discounts https://www.fedlex.admin.ch/eli/cc/1995/4964_4964_4964/de
  25. 25. Exchange rate: OANDA https://www.oanda.com
  26. 26. Merck & Co Securities and Exchange Commission Form 10K Fiscal Year 2024
  27. 27. BMS 2024 Financial Results
  28. 28. Roche Finance Report 2024
  29. 29. Takeda Pharmaceuticals Financial Report
  30. 30. AbbVie 2024 Financial Results
  31. 31. Novartis Annual Report 2024
  32. 32. Novo Nordisk Annual Report 2024
  33. 33. Financial Results of Astellas for Fiscal Year 2024
  34. 34. Pfizer Securities and Exchange Commission Form 10K Fiscal Year 2024
  35. 35. Astra Zeneca Full Year 2024 results
  36. 36. Medicare Drug Price Negotiation Program
  37. 37. Injectable Oncology Therapies: Benchmarking Gross and Net Price Differentials in Europe vs US. Poster presented at ISPOR Europe 2024; Barcelona, Spain, 17-20 November 2024 https://resources.indegene.com/indegene/blogs/trump-so-expands-drug-pricing-rules/ispor-2020-analysis.pdf
  38. 38. No drug price pledges by Pfizer, others in talks with US government, Pfizer CEO says
  39. 39. Pfizer Inc at Goldman Sachs Global Healthcare Conference
  40. 40. PhRMA Statement on Most Favored Nation Executive Order
  41. 41. Policy Brief International Price Differentials for Drug Prescriptions - June 7.docx

Appendix:

Table A1: Wholesaler Margins

Country Wholesaler Margin
UK 12.50%
Netherlands 6.50%
Sweden 2.70%

Table A2: Exchange rates - OANDA Quarterly average (March 2025 to May 2025)

Local currency USD
Euro 1.1257
GBP 1.3371
JPY 0.0069
CAD 0.7173
AUD 0.6421
CHF 1.22
SEK 0.10

Authors

Nekshan Dalal

Nekshan Dalal

Director PRMA & HEOR,
Indegene

Matthew Skoronskith

Matthew Skoronskith

Senior Director, PRMA & HEOR,
Indegene

William Lobb

William Lobb

VP, Strategic Initiatives,PRMA Biopharma,
Indegene