MFN Drug Pricing Won’t Help, But Competition Will

REALCLEARHEALTH

Pharmaceuticals cost more in America than in any other developed nation. But copying Europe’s price controls with Most Favored Nation pricing (MFN) will not fix that problem. Washington should instead focus on a reform that is already reducing patients prices: direct-to-consumer (DTC) pharmaceutical sales.

President Trump launched the current MFN initiative through a May 2025 executive order directing the Department of Health and Human Services (HHS) to establish price targets based on what comparable developed countries pay for the same medicines. The administration has since negotiated voluntary MFN agreements with major pharmaceutical manufacturers and is seeking to make that approach permanent through legislation.

MFN relies on a form of price control known as external reference pricing (ERP), which European countries have used for decades. Rather than Washington directly choosing a price ceiling, regulators anchor American prices to negotiated or regulated prices in selected foreign countries.

Europe’s experience shows that price controls do not merely lower a number on a price tag. Manufacturers respond when prices are artificially restricted. When accepting a low price in one country can lower permissible prices in several others, manufacturers have reason to delay launching products in lower-cost countries.

That is not theoretical. A review of European ERP policies found manufacturers gaming the system through strategic launch delays, higher initial prices, product withdrawals, and reduced supply in markets where regulated prices generated problems in other markets. For consumers, this means lower price mandates could cut access altogether.

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