Administration Revisits Idea of MFN Pricing, but Logistics Are Unclear

As expected, President Donald Trump signed an executive order on May 12 that would revisit the idea of implementing most-favored nation (MFN) pricing. While the proposal seems to be more extensive than his previous attempts at implementation of the model, it is scarce on details about how the process will go.

In the order, Trump noted that while the U.S. has less than 5% of the population in the world, it “funds around three quarters of global pharmaceutical profits,” an “egregious imbalance…orchestrated through a purposeful scheme” by pharma manufacturers “deeply discount[ing]” their drugs in foreign markets and charging “enormously high prices” in the U.S. to “subsidize” the lower prices outside the country.

He called for his administration to take several steps, including having:

• The secretary of the Department of Commerce and the U.S. Trade Representative take action to ensure that foreign countries are not engaging in “unreasonable or discriminatory” practices that result in Americans paying “a disproportionate amount of global pharmaceutical research and development,”
• The HHS secretary “facilitate” direct-to-consumer (DTC) purchases for companies selling their drugs “to American patients” at MFN prices, and
• The HHS secretary, in coordination with relevant federal departments, communicate MFN prices to manufacturers within 30 days.

Once those prices have been communicated, if companies do not make “significant progress” toward offering them, the order calls for several actions. Those include HHS’s proposal of a rule to “impose” MFN pricing; HHS’s certification that drug importation from “developed nations with low-cost prescription drugs” is safe and cost-saving, followed by the FDA commissioner outlining situations in which importation waivers will be granted; and an FDA review to “potentially modify or revoke approvals granted for drugs, for those drugs that [may] be unsafe, ineffective, or improperly marketed.”

In addition, following the publication of a report on recommendations to reduce drugmakers’ “anti-competitive behavior” as called for in Trump’s April 15 order on lowering drug prices, the U.S. Attorney General and the chairman of the Federal Trade Commission will, “to the extent consistent with law, undertake enforcement action against any anti-competitive practices identified within such report.”

The impact of implementing MFN pricing, says Imamu Tomlinson, M.D., CEO of Vituity, a physician-owned and -led multispecialty health care partnership, “will be difficult to assess until the actual initiative is in place. That said, this could drive costs down for patients.” And lower costs should in theory increase access, he tells AIS Health, a division of MMIT.

First MFN Pricing Attempt Faced Lawsuits

In his first administration, Trump first unveiled an International Pricing Index (IPI) model on Oct 25, 2018, in an Advanced Notice of Proposed Rulemaking (ANPRM). It proposed that instead of CMS reimbursing Medicare Part B drugs at their average sales price (ASP) plus 6%, it would reimburse these medications per an IPI based on drug pricing data from not only the U.S. but also 16 other developed countries.

That ANPRM was followed by a July 24, 2020, executive order that took a more hard-hitting approach than the IPI in that it called for an MFN price for Part B drugs. A Sept. 13, 2020, executive order revoked the July 24 order and called for MFN pricing in Part B and Part D.

Finally, as the administration was winding down, it released an interim final rule on Nov. 20, 2020, calling for the implementation of MFN pricing on Jan. 1, 2021, via a mandatory model under the CMS Center for Medicare & Medicaid Innovation. That rule resulted in lawsuits seeking to halt its implementation. Judges for those cases temporarily halted the model from taking effect.

On Aug. 10, 2021, under President Joe Biden, HHS issued a proposed rule rescinding the interim final rule. Less than a year later, on Aug. 16, 2022, Biden signed the Inflation Reduction Act (IRA), which requires CMS to negotiate the prices of Medicare drugs, first those in Part D, followed two years later by those in Part B as well.

Scope of Order Is Unclear

As for the newest executive order, questions exist about its various proposals, not the least of which is its scope. A fact sheet said that efforts to “reduc[e] price disparities at home” would apply to both Medicare and Medicaid, but it is unclear whether MFN pricing would apply to both Medicare Part D and Part B. Noting the vagueness of the order, Evercore ISI analyst Liisa Bayko in a May 12 research note wondered if the pricing also would be extended to the Dept. of Veterans Affairs. And as attorney Alan M. Kirschenbaum, director at Hyman, Phelps & McNamara P.C., wrote in the May 13 FDA Law Blog, “What types of drugs are to be covered: brands, generics, biologics, biosimilars, or some combination?” 

Bayko also wondered what MFN pricing even is, as “actual prices paid by countries are usually confidential.” She also questioned whether the administration has “the leverage to force other countries to agree to higher drug prices as they struggle to fund their own healthcare systems.”

Another question Bayko raised was what exactly is the DTC purchasing program facilitated by HHS? Similarly, Kirschenbaum wondered if that program would be available to Medicare and Medicaid beneficiaries only or to all consumers.

According to Tomlinson, several countries have DTC programs, which lead to competition, which in turn often drives down costs.

In the May 12 Cost Curve Apex blog, consultant Brian Reid deemed the “very strange suggestion” around DTC purchasing as “both intriguing and half-baked.” He wondered if evidence showing that patients will actually benefit from the order is available.

Many of the countries whose drug prices may be referenced in an MFN approach, including the United Kingdom, Canada and Australia, use quality-adjusted life years (QALY) in their health technology assessments to inform their pricing strategies. But as the Alliance for Aging Research points out, per the Affordable Care Act, Medicare cannot use QALYs for coverage and reimbursement decisions.

Furthermore, if the administration is considering using the IRA to implement MFN pricing, the use of QALYs in the IRA is “explicitly banned,” Reid pointed out. “So expect fireworks…and lawsuits,” he wrote.

Ultimately, said Reid, the order is “largely wishful thinking, with thin gruel for policy wonks.…This is an approach that feels unhinged in every possible way. I assume it’s DOA, legally. It’s so bad and so dumb that I wonder if it is purposely bad and dumb, a way for Trump to claim he is driving down drug prices without dealing with any of the consequences.”

“There is nothing in this order that is remotely actionable,” wrote Reid in his May 13 blog.

BIO: MFN Is ‘Deeply Flawed Proposal’

Advocacy groups for pharma manufacturers immediately criticized the order.

John F. Crowley, president and CEO of the Biotechnology Innovation Organization (BIO), called MFN “a deeply flawed proposal” in May 12 statement. “Researchers that spend years developing cures and breakthrough treatments are being penalized and the U.S. is falling behind in the 21st century biotech race. Meanwhile, U.S. medication prices prop up middlemen that prevent cost savings from being passed on to patients. The solution is investments that ensure the U.S. continues to lead the world in medical innovation, and policies that simplify the system."

Stephn J. Ubl, president and CEO of the Pharmaceutical Research and Manufacturers of America (PhRMA), said that the administration “is right to use trade negotiations to force foreign governments to pay their fair share for medicines. U.S. patients should not foot the bill for global innovation.” In a May 12 statement, he also pointed to PBMs, insurers and hospitals as taking “50% of every dollar spent on medicines” in the U.S.

However, Ubl maintained, using MFN pricing “would mean less treatments and cures and would jeopardize the hundreds of billions our member companies are planning to invest in America — threatening jobs, hurting our economy and making us more reliant on China for innovative medicines.” 

One manufacturer seems to have addressed that potential impact on investment. On the same day the president signed the executive order, Genentech, Inc., a member of the Roche Group, revealed plans to invest more than $700 million in a facility in Holly Springs, North Carolina, to support manufacturing of obesity drugs. The companies said that the project will add more than 1,500 construction jobs to develop the site and more than 400 high-wage manufacturing jobs to operate the facility. The new facility is part of Roche’s commitment to invest more than $50 billion in the U.S. over the next five years.

During a May 12 press conference, Trump cited weight-loss drugs as an example of how the U.S. pays more than other countries for the same drugs. He singled out “the fat-shot drug” that a friend of his is taking, pointing out that the same medication costs $88 in London compared with $1,300 in New York.

Endpoints News revealed a few hours later that a Roche spokesperson, “without referring to specific policies,” said the company’s $50 billion U.S. investment is dependent on “the current policy environment” and would be reevaluated “if legislation or regulations were implemented that would harm our industry’s ability to operate and innovate in America.”

However, Trump downplayed the potential impact on pharma. “I think the health care companies should make pretty much the same money. I really don't believe they should be affected very much because it's just a redistribution of wealth,” he said during the press conference. “Europe’s going to have to pay a little bit more. The rest of the world’s going to have to pay a little bit more, and America’s going to pay a lot less, again, because we have more population than when you think of the whole world. So basically what we’re doing is equalizing.”

Ultimately, says Tomlinson, “My hope is that this all leads to lower drug costs without devastating an industry that does have significant innovation. I am optimistic that drug companies will adjust to make sure they can continue to innovate new treatments for patients at a reasonable cost.”