MFN Executive Order: Global Reset of US Pharmaceuticals

The Trump administration signed an exhaustive executive order on May 12 that reignited the U.S. drug pricing debate and introduced a “favorite country” (MFN) pricing framework. The policy aims to directly minimize the price paid by Americans and the lowest in peer economies such as Germany, Switzerland and Canada.

Although the messaging is obvious – the prices for U.S. patients are lower and the global price is balanced, operational, legal and global impacts are more complex. For the pharmaceutical industry, the MFN Executive Order (EO) is not just a pricing directive; it is a potential reshaping of global business strategy, U.S. operations, regulatory enforcement and innovative economics.

Pricing policy without precedent

MFN EO aims to stop what the government calls “global liberal religion” and benefit from U.S.-funded drug innovations in other developed countries, with significantly lower costs. EO offers manufacturers 30 days of voluntary matching with the lowest international prices, or faces a range of potential actions, including rulemaking, import expansion and antitrust investigations.

In fact, it is very unlikely that we will see manufacturers lower prices within 30 days. There is no mechanism to do it – the listed prices in the United States are not easy to lower. Rebates and discounts are common tools, but cutting list prices across distribution channels will require complex regulatory actions, which can involve HHS rulemaking and even litigation if stakeholders delay. Manufacturers that have lowered wholesale acquisition cost (WAC) prices in recent years have run programs for years to ensure patients can continue to treat and there is no interference between distribution, pharmacy allocation, insurance coverage and patient support plans.

In other words, the policy ambitions collide with the regulatory and structural complexity of the U.S. drug pricing system that is spread out among Medicare, Medicaid, commercial insurance and other employer-funded programs.

Balancing affordability and innovation

There is no doubt that American patients need better access and affordability. MFN pricing can provide mitigation in the short term, especially with the direct-to-consumer (DTC) model enabled. DTC models face significant challenges to their own strengths. Currently, there is no current situation where supply chains directly receive more than 7B prescriptions to patients every year, and there is no key role distributors, pharmacies and other stakeholders play in the U.S. market. Furthermore, its impractical and potentially dangerous expectations are sent directly to patients, injected, injected and other physician-managed drugs and vaccines. The key risk of MFN pricing is how revenue compression affects the innovation pipeline.

The government’s self-evident hope is to “meet in the middle”: American prices are modest, while international prices are rising even more significantly, creating a balance that can retain global revenues and support ongoing R&D investments.

But getting other countries to raise prices is not a trivial matter. Many of these countries have national health budget and technical assessment frameworks that impose hard caps on pricing. For example, in many European markets, prices are negotiated based on cost-effectiveness and budgetary impact, rather than what manufacturers are charged. In many European countries, prescription drug prices and overall health care costs are lightning rod themes. While these populations may support increased defense spending, any increase in health care costs may be subject to intense social and political opposition.

Even if prices abroad are lower than those in the United States, they can still be considered expensive in these national systems, which usually operate under fixed health care and prescription drug budgets. These systems are based not only on clinical benefits, but also on the price of treatment patients they can afford. In some cases, even low-cost drugs (compared to U.S. prices) may not be affordable, delaying access or limiting coverage.

While the United States may threaten to expand drug imports beyond Canada, the strategy faces logistical and legal barriers, especially with limited supply of high-cost biologics and cold chain drugs from foreign countries. It is also unlikely that pharmaceutical manufacturers will ship enough products to Canada or all other former U.S. markets to meet the number of products needed for the U.S. population.

Domestic and globally, achieving a balance between affordability and innovation requires navigation of these complex systems. Without meaningful consistency across markets, equilibrium prices may be more aspiring than feasible.

Compliance Alternatives

At present, MFN EO does not have a clear law enforcement mechanism. There is no law that if the rule is made, there is no law that provides for litigation, just like the Trump administration’s previous MFN Medicare attempt.

Another route can be through Medicare and Medicaid Center for Innovation (CMMI). CMMI can be priced in MFN in the national Medicare and Medicaid program, allowing limited implementation to be implemented without new legislation. This pilot approach can also indirectly impact commercial pricing by triggering an optimal price reset, which may reduce the 340B ceiling price and the ripple effect across payer types. Business plans and PBMs can further attempt to exploit these low government prices as a way to indirectly reduce commercial prices, although past efforts have been less successful.

Global Trade Game: Pharmaceuticals as New Bargaining Chips

One of the most sensitive elements of EO is that it implies the use of trade strategies, including tariffs or export controls, raising drug prices to foreign governments. It could become a commercial game with participating in medicines, which has not happened in history. This is the case, given that the U.S. has no APIs, medical supplies and other products produced by the U.S., and the U.S. answer to imports is a further challenge – foreign governments threatening to withhold these U.S. products in a manner that threatens to detain U.S. products in a manner that threatens to do so without benefit.

This caused contradictions. On the one hand, the government wants to import cheap drugs from other countries. On the other hand, it wants those same countries to raise prices. If the United States ends up buying low-cost imports without causing international prices to rise, Pharma could lose revenue from both ends.

A broader cost debate

It is important to remember that prescription drugs account for about 10% of the total cost of medical care in the United States. The remaining hospitals are hospitalized, emergency visits, chronic disease management and administrative overhead. With the recent trend in healthcare costs showing 8-9% per year, total healthcare spending will be largely unaffected even if drug prices drop sharply.

Navigation unknown

The MFN executive order is a bold attempt to recalibrate global drug pricing for US patients in the center. However, its future remains uncertain without clear law enforcement, legal basis or international cooperation. Pharmaceutical companies must prepare for litigation, potential trade frictions, and a fluid regulatory landscape that may develop through CMMI pilot or agency rulemaking.

Companies should remain agile, perform scenario modeling, and be a healthcare ecosystem that increasingly connects global affordability with U.S. pricing policies.

This moment requires going beyond compliance. It requires leadership – cross-product strategy, pricing design and public trust. The industry’s response can shape not only profits, but also the future of innovation and access in the United States and beyond.

Photo: Gerenme, Getty Images

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