U.S. MFN Drug Pricing: What 2025’s Executive Order Means for Global Pharma

October 1, 2025
Blog

American Flag

The Most Favored Nation (MFN) pricing policy is once again under consideration in the U.S. First put forward in a 2020 Executive Order (EO) by the Trump Administration, the 2025 MFN policy aims to eliminate global free riding by aligning United States (U.S.) drug prices with the lowest prices paid in any comparable developed nation. This strategy is intended to address the longstanding concerns that American patients and taxpayers have been subject to higher drug prices, and, in doing so, subsidizing pharmaceutical innovation costs for the rest of the world. Industry stakeholders such as Eli Lilly’s CEO David Ricks continue to emphasize the stark differences between the U.S. and ex-U.S. healthcare system structures and stakeholder incentives, which raises uncertainty around whether importing pharmaceutical pricing systems from ex-U.S. markets into the U.S. healthcare system would achieve the intended EO aim.

Negotiated prices in Europe come with broad access, low patient copays and without administrative hurdles like prior authorizations. There are also no intermediaries that distort prices, and hospitals do not seek profits by selling medicines and marking them up. If we import foreign price controls and insert them into a U.S. system that isn’t built to function for patients, we risk embracing the worst of two worlds: the low productivity and output of Europe’s biopharma sector with the high out-of-pocket and distorted prices of the U.S. insurance market.”

—David Ricks, Eli Lilly, CEO

Since the initial 2020 EO was unveiled, legislative changes such as the introduction of the Inflation Reduction Act (IRA) have granted Medicare the authority to negotiate drug prices, creating a statutory pathway for the implementation of the MFN policy that was not previously possible.

On August 31st, the administration sent letters to manufacturers outlining near-term expectations and deadlines to:

Provide MFN pricing for all drugs to all Medicaid patients.
Enter a contract with the US to provide MFN pricing for newly launched drugs.
Enter a contract agreeing to repatriate increased foreign revenue to reduce US prices.
Participate in direct-to-consumer (DTC) distribution for high-volume, high-rebate drugs.

While the 2025 EO and letters sent to manufacturers outline a renewed policy direction, several key components remain undefined or subject to interpretation, demonstrating government willingness to pursue bold policy measures while delegating operationalization to relevant rulemaking agencies. The active dialogue that has been created by the MFN policy vision, and manufacturer first steps among key industry players, signals that manufacturers may be compelled to take action without the need for the MFN reference price system being formally implemented. Together, the combination of IRA implementation and MFN policy vision signals a shift in the U.S. market from low to increasing price sensitivity.

How Can Manufacturers Follow MFN Principles and Mitigate Associated Risks?

Targeting PBMs & GTN Relief

A noticeable reaction among large pharmaceutical manufacturers has involved accelerating direct-to-consumer (DTC) distribution channels as a strategic response to bypass traditional intermediaries such as pharmacy benefit managers (PBMs), offering patients a channel to purchase drugs directly at lower prices. DTC approaches focus on reducing medication costs, primarily for patients without insurance or with limited coverage. Industry leaders including Pfizer, Bristol-Myers Squibb (Eliquis 360), and Eli Lilly (Zepbound, LillyDirect), have publicly accelerated DTC strategy recently. The Eliquis 360 support program enables uninsured or underinsured patients to gain access to the drug at more than a 40% list price discount. The LillyDirect program was expanded to include Zepbound at a 50% list price discount, with insulin products repriced with a 70% discount and $35 monthly cap. Pursuing the DTC pathway provides large manufacturers with well-established distribution logistics, a relatively straightforward and rapid strategy to directly address the MFN policy vision to provide the best available price to U.S. consumers. However, while this strategy is demonstrating impact within the consumer market, broader influence will require active participation from employer groups and government stakeholders. From the patient perspective, manufacturers should consider that the DTC process can feel unfamiliar, complicated and expensive for patients, many of whom may not fully understand how medications are sourced and sold, potentially leading to doubts around whether their prescriptions are legitimate. To address this, manufacturers should focus on creating a smooth and supportive DTC experience, offering clear guidance and reliable information to help patients feel confident and informed throughout the process.

Withdraw Launch (Launched Products), Prioritize Alternative Market Segments / Launch Approach

Manufacturers may opt to mitigate the risk of MFN by withdrawing launched products or prioritizing the private vs. public market channel for pipeline assets in low-price RoW markets, where there is greater flexibility for the manufacturer to be the price setter vs. the public channel, where manufacturers are typically price takers. The revenue implications of this strategy are an important consideration and may vary depending on the therapeutic area in question. Furthermore, manufacturers will also need to consider reputational implications, as well as the availability of historical pricing information for launched products, which may still be referenceable as part of MFN price calculations. Manufacturers may also consider a more patient-centric approach in the context of indication expansions, including publishing clinical trial data to support incorporation into treatment guidelines without engaging in centralized HTA or reimbursement procedures, which can facilitate patient access to innovative therapies that are valued by KOLs and patients alike. This strategic shift raises a key question around how manufacturers might adjust their launch strategy in markets where the public channel comprises the major patient access route.

HTA body concerns around the impact that the U.S. MFN policy vision may have on patient access to drugs in ex-U.S. markets are starting to emerge, with NICE’s CEO Sam Roberts recently publishing a baseline analysis of drug approvals and availability to track baseline data to understand the potential impact of MFN, stating that “There are huge uncertainties. There could be a reduction in medicines launched, a reduction in commercial flexibilities, and there could be an increase in medicines terminated.”

Pursuing Alternative Discounting Methods & Out-Licensing

Manufacturers may look towards alternative discounting methods including expenditure caps, population and volume-based agreements, as the visibility and complexity of information within these agreements challenges the ability to back-calculate the net price. Differential net pricing guidance by market may therefore be established by manufacturers, depending on ease of ability to back-calculate the net price based on the visibility of information within such agreements.

Additionally, out-licensing ex-U.S. drug sales and marketing rights to a partner pharmaceutical manufacturer may also be a strategic route that manufacturers may pursue to maintain confidentiality of ex-U.S. net prices. Out-licensing agreements typically mandate strict net pricing confidentiality across partner manufacturers, effectively creating a pricing visibility firewall.

However, pursuing alternative discounting approaches and out-licensing does not directly address the call to action around rebalancing the funding of innovation between the U.S. and ex-U.S. markets, instead simply obscuring the visibility of ex-U.S. net prices. This strategy may also provoke a regulatory response, although the details of how this might manifest are currently unclear.

What Should Manufacturers Consider as MFN Policy Evolves?

Manufacturer objectives among this changing policy landscape will be focused on maintaining their existing level of revenue to support continued investment and funding into R&D and innovation, while improving patient affordability in the U.S. and continuing to provide access to patients in ex-U.S. markets. In navigating the evolving landscape shaped by the MFN policy vision, manufacturers face a multifaceted set of potential actions—both direct and indirect—to address the administration’s goals, and/or mitigate risk associated with the administration’s MFN policy vision.

The overarching recommendation is one of cautious vigilance: carefully watch and wait as clearer guidance emerges, particularly regarding pre-launch products, while actively engaging in scenario planning and evaluating options for products already on the market. Given the current uncertainty and remaining questions surrounding the legality of the directives, implementing significant changes to commercial planning will likely be premature. However, manufacturers should prepare by building flexibility and readiness to adapt quickly as the policy environment evolves.

Looking Ahead: Agility in a Shifting Policy Landscape

A crucial aspect of this preparation will be to ensure that ex-U.S. evidence packages are payer-relevant to maximize both value and pricing opportunity in ex-U.S. markets, which will help to mitigate the impact of ex-U.S. price translation into the U.S. should the MFN policy be implemented as intended, as well as rebalance the distribution of revenue generation globally. Moreover, meaningful legislative changes in pharmaceutical pricing have historically been difficult to achieve, with significant legal and practical hurdles, suggesting the administration may face continued challenges in charting a definitive course. Ultimately, success in this uncertain environment will hinge on manufacturers’ ability to remain agile and prepared, balancing the demands of the MFN policy vision while safeguarding innovation and access across global markets.

Authors: Max Hunt, Annabelle Brough, Nicolle Jaurre and Giulia Voto

REFERENCES