Most Favored Nation pricing could save billions, but savings may be reduced by drug pricing agreements
U.S. prescription drug prices are among the highest in the world. To address this issue, the federal government announced “Most-Favored-Nation” (MFN) pricing as a policy goal in 2025 to lower prices and reduce healthcare spending.
In a new study published in The Lancet, Thomas Hwang, MD, of Mass General Brigham, and colleagues report that the Most-Favored-Nation pricing models, as initially proposed, were projected to deliver substantial savings for Medicare. However, recently announced exemptions and agreements with companies could eliminate up to 80% of these savings.
The published study evaluates MFN payment models for drugs covered under Medicare Part B (GLOBE) and Part D (GUARD), examining how much they could reduce Medicare spending and how they could affect other countries. The analysis encompassed nearly 200 costly brand-name drugs that may be eligible for the proposed payment models and projected a decrease in net Medicare spending of $11.6 billion per year.
The researchers found that by anchoring Medicare prices to the lowest international benchmark among 19 reference countries, the models could reduce Medicare spending by 16-18%. However, they could also have consequences for other countries — especially given that for 73.2% of studied drugs, estimated reductions in Medicare spending would exceed annual sales in the country providing the price benchmark.
These cost-saving projections are greatly reduced when companies that have reached agreements with the federal government are excluded. Exempting the first 17 signatory companies cut projected savings by an estimated 71.3%. On August 31, the federal administration announced an additional nine deals with pharmaceutical companies. Using the same modeling approach, Hwang and his colleagues estimate the additional exemptions may now lead to a cumulative elimination of 80% of projected savings.
“The administration found a regulatory pathway to bring Most-Favored-Nation pricing to Medicare, the largest public purchaser of medicines in the country. Our study suggests that this policy could meaningfully reduce Medicare spending,” said Hwang. “But separate deals with pharmaceutical companies could eliminate most of those savings and shifts in global pricing could affect the availability of medicines elsewhere.”
Read the paper
Most-Favored-Nation Pricing for Prescription Drugs in US Medicare
Paper cited: Hwang, T., et al. “Most-Favored-Nation Pricing for Prescription Drugs in US Medicare: cohort study” The Lancet. DOI: 10.1016/S0140-6736(26)01555-2
Authorship: In addition to Hwang, authors include Simon Hediger, Advaita Krishnan, Christopher Cai, Aaron S. Kesselheim, and Kerstin Noelle Vokinger.
Funding: This study was supported by a grant from Arnold Ventures (Drs. Hwang and Kesselheim). The funder had no role in the design and conduct of the study; collection, management, analysis, and interpretation of the data; preparation, review, or approval of the manuscript; and decision to submit the manuscript for publication.
Disclosures: Hwang reports serving as a member of the European Society for Medical Oncology (ESMO) Magnitude of Clinical Benefit Scale Working Group and receipt of unrelated consulting fees from Treehill Partners LLP. Kesselheim reports serving as a consultant for Alosa Health and as an expert witness on behalf of a payor in a case against Teva regarding marketing of Copaxone and on behalf of a group of state attorneys general and payors in a case against numerous generic manufacturers related to alleged price fixing. All other authors declare no competing interests.
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