Most-Favored-Nation Drug Pricing: $733B in U.S. Savings? | iPharmaCenter

The Council of Economic Advisers has published a detailed analysis of the Trump Administration’s Most-Favored-Nation (MFN) drug pricing framework, outlining how the policy could deliver substantial savings to U.S. patients and public programs while rebalancing who pays for pharmaceutical innovation worldwide. The framework combines voluntary agreements with major manufacturers, new reference pricing rules, and targeted reforms to Medicaid, direct‑to‑consumer markets, and Medicare coverage for GLP‑1 drugs.

Why MFN Was Proposed?

The starting point for the policy is a familiar issue: the U.S. consistently pays far more for branded medicines than other high‑income countries. Analysis from HHS’s Office of the Assistant Secretary for Planning and Evaluation (ASPE) suggests U.S. brand‑name drug prices are roughly three times those in peer markets even after factoring in rebates and discounts, meaning American patients and taxpayers effectively subsidize global R&D.

Developing a new medicine is capital‑intensive, with estimates placing the cost per new drug in the range of $1 to $2.8 billion , and yet more than half of global branded pharma revenue comes from the U.S., rising to about three‑quarters for some top‑selling products, despite the country having under 5% of the world’s population.

The MFN framework is presented as an attempt to correct this imbalance by tying U.S. prices to what other wealthy countries pay, while using trade policy to push those countries to pay more of the R&D bill.

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How the MFN Framework Works?

MFN is targeted at single‑source brand drugs and biologics that lack generic or biosimilar competition, which account for most spending even though they represent a minority of prescriptions. Generics and biosimilars are excluded on the grounds that competitive forces already drive their prices down to or below international levels, although some multisource or biosimilar products may be offered under MFN-related programs to give states or patients additional options.

A core design choice is how “Most‑Favored‑Nation” price is defined. Rather than referencing list prices, which can be heavily discounted in opaque ways, MFN uses net prices after all manufacturer concessions, including rebates and clawbacks such as the UK’s VPAG scheme.

Manufacturers will report these confidential net prices to CMS under a specified methodology, and the government will adjust foreign prices for differences in GDP per capita using purchasing‑power‑parity measures.

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The reference basket includes the G7 countries (excluding the U.S.) plus Denmark and Switzerland, which together cover large economies with mature regulatory systems and host the headquarters of the world’s largest pharmaceutical firms. For each drug, the second‑lowest net price in this group becomes the MFN benchmark, a design intended to minimize the impact of outliers and create clear targets for trade negotiators and company pricing teams.

The framework has three main pillars:

• Medicaid MFN for existing brand drugs and biologics

• Discounted direct‑to‑consumer pricing via TrumpRx.gov

• Prospective MFN for future drug launches across all U.S. payers

Medicaid MFN: Tapping the Biggest Brand‑Name Cost Drivers

Medicaid already receives large mandatory rebates through the Medicaid Drug Rebate Program (MDRP), including a base rebate and an inflation penalty, complemented by state‑negotiated supplemental rebates. Even so, a CMS analysis cited in the report indicates that about 62% of net Medicaid drug spending, around $30 billion annually, is concentrated in roughly 150 single‑source products, where net prices are typically two to three times higher than those paid in MFN reference countries.

Under the voluntary MFN agreements, manufacturers commit to selling these single‑source drugs to state Medicaid programs at MFN prices when current net prices exceed the MFN benchmark. These additional “MFN rebates” are structured as supplemental rebates so they do not trigger best‑price effects in 340B or other programs.

If utilization were unchanged, aligning Medicaid net prices with MFN benchmarks would cut drug spend by an estimated 18 billion dollars per year, but the report assumes price reductions will lead to higher utilization, offsetting about 20% of those savings. After this adjustment, net Medicaid savings are projected at $14.4 billion per year, with around $8.2 billion flowing to the federal government and $6.2 billion to the states, and further indirect savings expected from better disease control and fewer complications. Over a decade, the Medicaid MFN piece alone is projected to save $64.3 billion ($36.6 billion federal, $27.6 billion state), with the largest savings in antipsychotics, antiretrovirals, oncology drugs, inflammatory disease therapies, and antidiabetics.

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TrumpRx.gov: MFN Discounts in the Cash‑Pay Market

A second component focuses on patients who pay out of pocket for high‑cost medicines, especially GLP‑1s for obesity and fertility treatments, which often lack comprehensive coverage. The Administration has negotiated MFN‑linked direct‑to‑consumer prices and hosts them on TrumpRx.gov, a portal that connects patients to manufacturer or pharmacy offers and generates savings coupons.

Although these purchases are currently outside insurers’ benefit designs, the White House is backing legislation to require commercial plans to count MFN‑priced purchases towards deductibles and out‑of‑pocket limits, and to ensure that TrumpRx.gov purchases count towards Medicare Part D’s out‑of‑pocket cap. As of late April 2026, 16 of 17 manufacturers with MFN deals had integrated their offers into the platform, with significant discounts already visible for popular drug categories.

GLP‑1 drugs for obesity

The report highlights GLP‑1 receptor agonists and related incretin‑based drugs, which are described as delivering weight‑loss outcomes previously seen only with bariatric surgery and adding benefits in glycemic control and cardiovascular risk reduction. Despite their potential, only about 30% of health plans reportedly cover GLP‑1s for obesity, largely due to cost and the size of the eligible population.

Through MFN negotiations, direct‑to‑consumer prices for leading weight‑loss GLP‑1s such as Zepbound and Wegovy have been substantially reduced, from roughly 1,000 to 1,350 dollars per month to around 350 dollars, with starter doses cut from about 500 dollars to 199. Oral GLP‑1 initiation doses are offered near 149 dollars, with higher strengths priced around 299. Existing GLP‑1 users paying cash are expected to save around 1,800 dollars in 2026, rising to about 3,000 dollars annually by 2028 as MFN discounts deepen.

Fertility medicines

Fertility drugs are another focal point, reflecting the fact that roughly one in eight women may require fertility services but only about one‑third of employer plans cover fertility medications. Negotiations have cut the cash price of Gonal‑F, a widely used follicle‑stimulating hormone, from 75 dollars per 75 units to 25 dollars for families under 550% of the federal poverty level and to 42 dollars for higher‑income households, with similar reductions for Cetrotide and Ovidrel.

Prospective MFN: Linking Future Launch Prices to International Benchmarks

The prospective MFN pillar applies to all future drug launches and is arguably the most consequential piece in terms of long‑run savings. Under this construct, manufacturers agree that the average net price they realize in the U.S. across all payers cannot exceed the MFN benchmark derived from reference countries. That gives companies flexibility to manage differing rebate obligations in Medicaid, Medicare and commercial markets, but caps overall U.S. pricing relative to peers.

To estimate potential savings, the Council simulated applying MFN to novel drugs approved by FDA between 2021 and 2025, using IQVIA MIDAS sales data for the U.S. and reference countries. For each drug and year, they identified the second‑lowest foreign price, applied it to observed U.S. volumes to simulate MFN‑aligned spending, and compared this with actual U.S. spending to derive savings.

Assuming a 3% annual growth in pharmaceutical spending, a 10% share of new drugs delayed for reasons unrelated to pricing, and convergence that lowers U.S. net prices by roughly 30% over a decade, the analysis projects:

• 529 billion dollars in U.S. savings over 10 years when starting from the 2021–2025 cohort of new drugs

• Up to 733 billion dollars in savings when projections are anchored in the 2025 cohort, which better reflects current innovation pipelines

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Will MFN Hurt Drug Innovation?

A central concern for any aggressive pricing policy is its impact on R&D incentives. The report’s core argument is that MFN is designed not to shrink global pharmaceutical revenue, but to redistribute it more equitably across wealthy countries. In markets with strict price controls, manufacturers currently accept prices that cover marginal costs but not their “fair share” of global sunk R&D costs, driving disproportionate reliance on the U.S. market.

By signaling that the U.S. will no longer pay far more than peer countries, the MFN approach is expected to force foreign governments to either accept delayed access or pay higher prices, especially if trade policy is aligned with these objectives. The report cites a recent U.S. - UK arrangement that raised cost‑effectiveness thresholds and lowered clawback rates as an example of how trade negotiations can increase net pharma spending abroad.

The Council also points to FDA initiatives, such as AI‑enabled review tools, draft guidance on Bayesian trial designs, and a new framework for individualized therapies, that aim to streamline development and regulatory review, thereby reducing R&D costs. Taken together, they argue, MFN plus trade and regulatory reforms should keep the global “innovation base” robust, with the U.S. remaining the leading but more proportionate funder of pharmaceutical R&D.

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Trump vs. Biden: Competing Drug Pricing Visions

The final section of the report contrasts the MFN framework with the Biden Administration’s drug pricing reforms under the Inflation Reduction Act (IRA). In the Council’s view:

Market coverage: IRA’s negotiation and pricing provisions focus on a limited set of drugs in Medicare Parts B and D, leaving commercial and private insurance markets largely untouched, whereas MFN is framed as applying across all U.S. market segments via prospective MFN and TrumpRx.gov.

Out‑of‑pocket relief: IRA’s Part D redesign, including the 2,000‑dollar cap, is characterized as raising premiums and taxpayer costs without directly lowering list or net prices, while MFN claims to deliver immediate cash‑price relief in the self‑pay market and future out‑of‑pocket reductions through lower underlying prices and GLP‑1 co‑pay limits.

Timeline and fiscal impact: The report notes that years after passage, IRA’s drug price‑related benefits have not yet fully materialized, while MFN is said to have produced visible GLP‑1 price cuts within six months of the executive order. Citing CBO projections, the Council links IRA reforms to higher Part D spending driven by premium growth, whereas MFN is credited with nearly 600 billion dollars in savings over a decade.

Beyond pricing, the Council frames Trump‑era policy as more supportive of domestic pharmaceutical manufacturing and R&D through tax and regulatory incentives, and casts Biden‑era policies as more redistributive and regulatory.

Most-favored nation: Takeaways for Pharma, Payers and Patients

For the pharmaceutical industry:

The MFN framework, would represent a major shift in global pricing strategy. U.S. launch and net prices would be tethered to a moving international benchmark, while trade pressure and regulatory reforms push foreign markets to accept higher prices, altering the traditional pattern in which high U.S. prices offset heavy foreign price controls.

For payers and policymakers:

the model promises large projected savings: about $64 billion in Medicaid, roughly 529–$733 billion from prospective MFN on new drugs, and additional billions from direct‑to‑consumer discounts and fertility drug price cuts. For patients, particularly those paying cash for GLP‑1s or IVF services, the immediate effect is visible in lower monthly prices and reduced out‑of‑pocket costs.

At the same time, the approach carries risks and open questions: how foreign governments will respond to U.S. pressure, whether net revenue will in fact remain stable or grow, and how manufacturers will adjust launch sequencing, indication strategies, and contracting in response to MFN constraints. But the Trump administration claims that MFN is a “historic step” toward lowering U.S. drug costs, improving fiscal sustainability, and rebalancing global contributions to drug innovation without undermining the pipeline of new medicines.