Following a series of “most favored nation” (MFN) pricing deals with 17 large pharma companies, the Trump administration released a report Tuesday projecting a potential $529 billion in savings from the policy over the next decade.
That $529 billion figure comes from an estimation of prospective MFN, in which biopharma companies pledge to launch all future U.S. drugs at prices on par with several high-income countries, according to a May 5 report from the White House’s Council of Economic Advisers.
The number was based on reference data from all novel drug launches from 2021 to 2025. Projected savings would swell to $733 billion if only the 2025 cohort—which the report describes as “more aligned with current innovation pipelines”—is used for the calculation.
Unlike previous attempts to curb U.S. drug costs, the MFN construct carries a broader footprint, purportedly applying “across all markets in the U.S., inclusive of the private insurance market,” according to the report.
However, the exact mechanism remains a black box. The Centers for Medicare & Medicaid Services has proposed MFN pilot models, which only cover Medicare or Medicaid. The administration has yet to define how commercial markets, such as employer-sponsored insurance, will access those discounted rates. Details of the agreements between the Trump administration and the 17 pharma firms have not been disclosed.
Separate from prospective MFN, manufacturers will also make existing drugs available to state Medicaid programs at MFN prices. The White House estimates this provision will save the U.S. government $64.3 billion over 10 years, with the biggest windfall coming from antipsychotics, antiretrovirals, antineoplastics, and drugs for inflammatory diseases and diabetes.
However, the math for these massive savings only adds up if the administration can expand its circle of agreements beyond the 17 Big Pharma firms initially targeted by President Donald Trump.
“Moving forward, the Administration expects to reach similar agreements with most manufacturers of sole-source brand-name drugs and biologics in the nation,” the White House report says.
Mid-sized pharma companies are already bracing for an expansion of MFN beyond the largest manufacturers.
During an earnings call last week, Astellas CEO Naoki Okamura said the Xtandi maker has not received a letter from the U.S. government, but it’s trying to “open a channel to discuss with government authorities.” The company has been preparing itself based on known components of MFN agreements, he said.
Meanwhile, a group of more mature biotech companies, mostly with one or two drugs on the market, have recently formed the Midsized Biotech Alliance of America (MBAA), wary of MFN’s impact on their business models. These companies argue that they lack the diverse portfolios of pharma companies that can absorb revenue hits from pricing pressure.
Another key assumption underlying the White House’s latest drug cost savings calculations is that the combination of prospective MFN and trade policy efforts would “result in a 30% decrease in net prices for drugs in the U.S. by the end of the 10-year period.”
MFN prices will be determined by net prices paid by eight high-income countries: Canada, Denmark, France, Germany, Italy, Japan, Switzerland and the U.K. During AstraZeneca’s earnings call last week, CEO Pascal Soriot suggested the British pharma may choose not to launch in those countries if it couldn’t obtain satisfactory reimbursement. It will undermine the U.S. savings goal if companies avoid having to match lower benchmark prices by skipping certain reference markets.
In addition to the separate MFN deals with companies, “the Administration is working with Congress to codify those voluntary agreements into law to ensure that patients continue to benefit from price discounts,” the White House report says.
That effort has faced some resistance. In February, a coalition of more than 50 leaders of conservative and free-market organizations penned a letter to members of Congress opposing engraving MFN into law, arguing that doing so would “import socialist price controls and values into our country.”
Drugmakers apparently are not supportive of codifying the policy, either. Eli Lilly, for one, opposes the effort, CEO David Ricks told CNBC last month, calling it a “bad policy,” even though the Indianapolis pharma has signed an MFN deal with the administration to include Medicare coverage of its popular GLP-1 therapies.
“When you throw it into the congressional process, what goes in is not what’s going to come out,” Ricks said. “And I think we see a lot of people who would rather reduce prices today and not worry about whether we have any new medicines tomorrow, not worry about whether America will have a robust drug industry and we’ll be able to do research in this country. And I worry about those things, so I don’t think that’s a great idea, and we’ve been pretty clear with the administration and the congressional leaders about that.”
An MFN law could potentially wipe out smaller biopharma firms, Richard Pops, CEO of Alkermes and chair of the newly formed MBAA, recently told Stat.
“The instinct toward rationalization of prices between U.S. and Europe is appropriate and will persist,” he said, “and in so doing, there could be legislation that—if it’s drafted incorrectly or sloppily—could inadvertently take out these companies.”