The Consequences of Most Favored Nation Drug Pricing Model for Patients and Innovation

The White House and some members of Congress have recently proposed adopting a "Most Favored Nation" (MFN) pricing model for Medicaid drugs. While improving affordability is an important goal, MFN would do more harm than good by undermining medical innovation and delaying future treatments.

A "Most Favored Nation" model -- also known as external reference pricing or international reference pricing -- would tie the prices that the U.S. government pays for drugs to those in countries with strict price controls and limited access to new therapies.

This approach would weaken the investment ecosystem that powers U.S. drug development. Small, early-stage biotech companies -- especially in high-risk areas like oncology, gene therapy, and rare diseases -- rely on private capital to fund years of research and clinical trials before they ever get a new treatment off the ground, through FDA approval, and available to patients. MFN would signal to investors that there will be a cap on any potential returns, dramatically increasing market volatility and pushing investors away from the riskiest, most innovative science.

Developing a new medicine already costs over $2 billion and takes more than a decade. Under an MFN model, robust private investment will dry up and many of the next breakthroughs simply won't happen.

America leads the world in drug development because we reward risk-taking. MFN would reverse that -- cutting off the lifeblood of future cures and weakening our global leadership. We urge policymakers to reject MFN and pursue smarter reforms that improve access without sacrificing innovation. The future of medicine depends on it.

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