MFN executive decree: global reset for the United States Pharmaceutical

The Trump administration has rekindled the debate on American drug prices by signing a radical decree on May 12, presenting a “most favored” price frame (MFN). This policy aims to directly align what Americans pay for prescription drugs with the lowest prices paid in peers economies such as Germany, Switzerland and Canada.

Although messaging is clear – a drop in prices for American patients and equalization of prices around the world – operational, legal and global implications are much more complex. For the pharmaceutical industry, the executive decree of the MFN (EO) is not only a directive on prices; This is a potential reshaping of the global commercial strategy, American operations, the application of regulations and the innovation economy.

An unprecedented pricing policy

The MFN EO is designed to stop what the administration calls “global freeloading” – where other developed countries benefit from an innovation of drugs funded by the United States at significantly lower costs. The OE gives the manufacturers 30 days to voluntarily correspond to the lowest international prices or to face a range of potential actions, in particular the regulations, the expansion of imports and antitrust surveys.

Realisticly, it is very unlikely that we see the manufacturers lower prices within 30 days. There is no mechanism to do this – list prices in the United States are not easily reduced. The discounts and discounts are common tools, but the price reduction of the list between the distribution channels would require complex regulatory maneuvers, potentially involving HHS or even disputes if the stakeholders postpone. Manufacturers who have lowered the prices of wholesale acquisition costs (WAC) in recent years have organized programs of years to ensure that patients can remain in therapy and there are no disruptions between distribution, pharmacy dispensation, insurance coverage and patient support programs

In other words, the ambition of the policy collided with the regulatory and structural complexity of the pricing systems of American drugs, which are fragmented in health insurance, commercial insurance, commercial insurance and other plans sponsored by the employer.

Balance affordability and innovation

There is no doubt that American patients need better access and better accessibility. MFN pricing could offer short -term relief, especially if direct consumers (DTC) models are activated. DTC models have important challenges on their own merit. There is simply no current supply chain to obtain more than 7b of prescriptions per year directly from patients without the key role played by distributors, pharmacies and other stakeholders on the American market. In addition, it is impassable and potentially dangerous to expect drugs and infused, injected drugs and other doctors to be sent directly to patients. The key risk of MFN pricing is how income compression could affect innovation pipelines.

The tacit hope of the administration is to “meet in the middle”: that American prices drop modestly while international prices increase more considerably, creating a balance that preserves global income and supports continuous R&D investments.

However, bringing other countries to increase prices is not a little task. Many of these countries have national health and technological assessment budget executives that impose hard ceilings at prices. In many European markets, for example, prices are negotiated according to profitability and budget impact – not on what the manufacturer wants to invoice. The prices of prescription drugs and overall health care costs are, such as the United States, lightning subjects in many European countries. Although these populations can support the increase, for example, defense expenses, any increase in health care costs should be greeted by social and political opposition.

Even when prices abroad are lower than those in the United States, it can always be considered costly in the systems of these countries, which often operate under fixed budgets for health and prescription drugs. These systems determine prices not only on the basis of clinical advantages, but also on the number of patients they can afford to treat. In some cases, even a low -cost drug (compared to the American price) may be unaffordable on a large scale, delaying access or completely limiting the coverage.

And while the United States could threaten to extend the importation of drugs beyond Canada, this strategy is faced with logistical and legal obstacles-in particular for high cost biologicals and cold-chain drugs with a limited foreign supply. It is also unlikely that pharmaceutical manufacturers ship enough products in Canada or to all other ex-American markets to satisfy the amount of product necessary for the American population.

The achievement of the balance between affordability and innovation, both at the national and global level, requires navigating these complex systems. Without a significant alignment on the markets, the equalization of prices can remain more ambitious than actable.

Compliance alternatives

Currently, the MFN EO exists without a clear execution mechanism. No law obliges compliance, and a dispute is expected if the realization of rules attempts to impose price mandates – as shown in the previous attempt of MFN of the Trump administration for Medicare Part B.

Another route could do without the Center for Medicare and Medicaid Innovation (CMMI). CMMI could pilot MFN prices in a national Medicare and Medicaid program, allowing the implementation of the limited scope without new legislation. This pilot approach could also indirectly affect commercial prices by triggering the best prices resets, which could reduce the price of the 340B ceiling and rally between the types of payers. Commercial plans and PBMs could try more to take advantage of these lower government prices as a means of indirectly reducing commercial prices, although similar past efforts have been less successful.

Global Trade Games: Pharma as a new negotiation chip

One of the most geopolitically sensitive elements of the OE is its implicit intention to use commercial tactics, including prices or export controls – to put pressure on foreign governments to increase the prices of drugs. It could become a business game with involved pharm, something that has not happened historically. The commercial game involving health care is also challenged since there are APIs, medical supplies and other products that are not manufactured in the United States and for which the United States responds to imports-a scenario where foreign governments threaten to retain products from the United States in response to American threats do not benefit from one or the other side.

This increases a contradiction. On the one hand, the administration wishes to import cheaper drugs into other nations. On the other, he wants these same countries to increase their prices. If the United States ends up buying imports at a lower cost while not increasing international prices, Pharma could lose income from both ends.

Broader costs debate

It is important to remember that prescription drugs represent approximately 10% of the total American health costs. Hospital stays, emergency visits, management of chronic diseases and general administrative costs make up the rest. Recent medical costs showing annual increases from 8 to 9%, even if drug prices dropped considerably, total health expenses would remain largely not affected.

Navigate the unknown

The executive order of the MFN is a daring attempt to recalibrate the world prices of drugs – with American patients in the center. But without clear application, legal landing or international cooperation, its future remains very uncertain. Pharmaceutical companies must prepare for disputes, potential commercial friction and a fluid regulatory landscape which can evolve through CMMI drivers or agency regulations.

Companies must remain agile, carry out a scenarios modeling and prepare for a health care ecosystem which is increasingly linked to the global affordability to the American pricing policy.

This moment requires more than compliance. It requires leadership – through product strategy, price design and public confidence. The way the industry reacts will not only shape the margins, but the future of innovation and access to the United States and beyond.

Photo: Gerenme, Getty Images

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