Most-Favored-Nation Pricing Would Import Europe's Drug Rationing

President Trump's State of the Union address featured several promising healthcare ideas.

Expanding access to patient-owned health savings accounts and routing federal subsidies through them, rather than through insurance companies, would unleash competition by empowering consumers to spend their healthcare dollars as they see fit. So would stronger price transparency requirements.

But one proposal the president continues to champion would move American healthcare in the opposite direction. And that's his push for "most-favored-nation" drug pricing.

The policy would require pharmaceutical manufacturers to sell medicines in the United States at prices no higher than those charged in certain other developed countries.

The president has encouraged companies to align their U.S. prices more closely with those in foreign countries — and is urging Congress to codify the approach into law.

The political appeal is obvious. U.S. drug prices are roughly 2.8 times higher than those in 33 peer countries analyzed by RAND.

Why should Americans pay more?

Lower foreign prices are not the result of superior bargaining.

They are the product of government price controls.

Canada, the United Kingdom, and much of Europe cap what they are willing to pay for new medicines.

If manufacturers refuse, then the drug simply may not become available to patients.

Codifying MFN would effectively import those foreign price ceilings into the United States --- and with them, the value judgments that underpin those ceilings.

Foreign health systems frequently rely on a metric known as the quality-adjusted life year— or QALY — when determining whether a drug will be covered. The QALY attempts to assign a monetary value to one additional year of life, adjusted for health status.

In the United Kingdom, the National Institute for Health and Care Excellence, or NICE, typically considers treatments cost-effective only if they fall below £20,000 to £30,000 per QALY, or roughly $27,000 to $40,000.

British authorities announced in December that they'd bump that range up to £25,000 to £35,000 per QALY in April 2026 — thanks in no small part to pressure the Trump administration put on Britain to pay more for novel drugs.

If a drug's price per additional year of healthy life is beyond that range, NICE typically doesn't cover it — regardless of how urgently patients may need it.

The QALY framework has troubling implications.

Treatments that extend the lives of elderly, disabled, or chronically ill patients often generate fewer "quality-adjusted" life years by definition. The metric does not explicitly declare some lives less valuable. But its calculus can have that effect.

Federal law prohibits Medicare from using QALYs to determine coverage or impose cost-effectiveness thresholds.

Codifying MFN would not formally authorize the use of QALYs in the United States.

But it would peg U.S. prices to those in countries that rely heavily on them.

In other words, it would subject Americans to the value judgments of foreign bureaucrats  — and the rationing decisions that follow.

Price controls also carry long-term consequences for innovation.

The United States is the world's medicine chest, accounting for more than half of global new drug development. That leadership depends on the ability to earn a return on enormous research investments. When governments cap prices, investment slows and fewer breakthroughs follow.

In addition, countries with strict price controls must wait for access to new medicines. Just 59% of drugs launched globally between 2012 and 2021 were available in the United Kingdom as of October 2022. In Canada, just 45% were available.

By contrast, 85% of those drugs were available to U.S. patients.

Why would Congress want to copy the policies of countries that cannot or will not furnish their citizens with the most cutting-edge therapies?

And why would it want to enshrine in law foreign policies that discriminate against elderly, chronically ill, and disabled people?

Importing lower drug prices from abroad may seem like fair play. But it would be a dangerous bargain for Americans.

Sally C. Pipes is President, CEO, and Thomas W. Smith Fellow in Healthcare Policy at the Pacific Research Institute. Her latest book is "The World's Medicine Chest: How America Achieved Pharmaceutical Supremacy — and How to Keep It." Follow her on X @sallypipes. Read more Sally Pipes Insider articles — Click Here Now.