Foreign Drug Pricing Policy Creates Unfavorable American Outcomes

 There’s no question that the budget reconciliation process is one of the most politically complex tasks Congress undertakes. But the pressure to pass a package cannot justify bad policy—especially when it threatens patient access, undermines American innovation, and invites foreign price-setting into our healthcare system.

That’s exactly what would happen under the “Most Favored Nation” (MFN) policy now being considered. MFN would tie Medicaid drug rebates to the lowest prices paid by foreign countries—many of which operate socialized, single-payer systems where bureaucrats dictate prices and patients wait months, even years, for access to new treatments.

Most Medicaid patients already pay less than $8 for their medicines today. Despite being sold as a pro-patient policy, MFN does nothing to further decrease these already low costs or improve access to care. Compared to Americans, patients living in countries that have adopted government price controls on pharmaceutical treatments consistently have access to fewer innovative medicines. Imposing those same price controls in the U.S. would create similar challenges for Americans looking to access vital treatments in order to stay healthy, independent, and in the workforce.

Tying our system to socialist models abroad means importing the same treatment delays and access restrictions that plague those countries. Patients with cancer, rare diseases, or other serious conditions could be the first to suffer.

Because Medicaid rebates impact the 340B Drug Pricing Program—a federal safety net program intended to help vulnerable patients access care—patients, employers, and taxpayers could all see increased costs through the inclusion of MFN in the Medicaid rebate formula. The 340B program requires pharmaceutical manufacturers participating in Medicaid to provide drugs at steep discounts to hospitals, clinics, and other entities serving a disproportionate number of low-income and uninsured patients. 340B prices are set based on rebates required in Medicaid.

Since its establishment in the early 90s, loopholes in the 340B statute have enabled covered entities to use the program as a profit center. Nationally, the 340B program is already driving up costs for employer-sponsored healthcare plans by up to $5.2 billion. MFN would exacerbate perverse incentives within the 340B program by enabling greater markups of drugs purchased at a discount by hospitals to the detriment of employers and taxpayers.

The U.S. is the global leader in pharmaceutical innovation. By hitting this thriving sector, MFN weakens U.S. competition and leadership just as China is growing its influence. In the past five years, China’s share of global clinical trials has increased from 10% to 15% of the worldwide share—an increase of 57%. China has also generated a 200.9% increase in drug development since 2019.

Recently, biopharmaceutical companies have announced more than $150 billion in U.S. investments. An MFN policy will only put these gains, and the benefits of homegrown innovation, at risk.

The damage wouldn’t stop with Medicaid. If manufacturers are forced to sell drugs at unsustainably low prices, they may pull out of the Medicaid market altogether. That would trigger ripple effects into Medicare Part B, where manufacturers are required to participate in Medicaid for their drugs to be reimbursed. Seniors could lose access to lifesaving treatments. That’s a risk too big to ignore.

MFN would also gut a key policy win from the Trump administration: the massive return of pharmaceutical investment to the United States. Since his election, companies have announced a whopping $230 billion in U.S.-based manufacturing and research projects. MFN threatens to undermine that momentum and hand a strategic advantage to nations like China and India, which are aggressively scaling their domestic biotech industries.

The U.S. biopharmaceutical sector is one of our greatest national assets. Nearly two-thirds of all new medicines developed in the last decade came from American firms. That leadership is only possible because our system rewards innovation. Replacing it with a price control model borrowed from European bureaucrats will crush investment and slow the development of new cures.

Even worse, American taxpayers already shoulder a disproportionate share of the cost of drug development, while wealthy countries underpay and benefit from our innovations. MFN would effectively lock in this freeloading by forcing U.S. prices down to their subsidized levels—making it even harder for American companies to recoup R&D investments. That’s not reform. It’s surrender.

There are smarter, targeted ways to reduce healthcare costs without sacrificing patient access or innovation. Congress should:

• Eliminate Medicaid loopholes and wasteful spending by requiring more frequent eligibility checks, ending special treatment for able-bodied adults, and cracking down on provider tax schemes that inflate federal payments.
• Rein in pharmacy benefit managers (PBMs)—the middlemen who pocket massive rebates while patients pay more at the counter. Any serious reform must include transparency and accountability for PBMs.
• Fix the 340B program, which was designed as a safety net but is now exploited by hospitals to mark up drugs and pad profits—driving up costs for employers and taxpayers. MFN would make this problem worse by further distorting rebate calculations.

We’ve already seen the harmful effects of price control policies in the Inflation Reduction Act. MFN would build on those failures—further shrinking access and disincentivizing future cures for cancer, Alzheimer’s and other chronic diseases. And it would do so by handing pricing authority to foreign governments that don't answer to the American people.

This is a critical moment. Policymakers must choose between protecting American innovation and autonomy or importing failed socialist models that put bureaucrats in charge of healthcare decisions.

If Congress is serious about affordability, competition, and patient access, it should reject the MFN model and pursue reforms that put patients—not foreign price-setters—in charge.

Andrew Langer is Executive Director of the Coalition Against Socialized Medicine

https://www.realclearpolicy.com/articles/2025/05/09/foreign_drug_pricing_policy_creates_unfavorable_american_outcomes_1109180.html