Glenn Hunzinger , 2025-06-22 13:53:00
The Trump administration reignited the U.S. drug pricing debate by signing a sweeping Executive Order on May 12, introducing a “Most Favored Nation” (MFN) pricing framework. This policy seeks to directly align what Americans pay for prescription drugs with the lowest prices paid in peer economies such as Germany, Switzerland, and Canada.
While the messaging is clear — lower prices for American patients and an equalizing of prices across the globe — the operational, legal, and global implications are far more complex. For the pharmaceutical industry, the MFN Executive Order (EO) is not just a pricing directive; it’s a potential reshaping of global commercial strategy, US operations, regulatory enforcement, and innovation economics.
A pricing policy without precedent
The MFN EO is designed to halt what the administration calls “global freeloading” — where other developed countries benefit from U.S.-funded drug innovation at significantly lower costs. The EO gives manufacturers 30 days to voluntarily match the lowest international prices or face a range of potential actions including rulemaking, importation expansion, and antitrust investigations.
Realistically, it’s highly unlikely we’ll see manufacturers lower prices within 30 days. There’s no mechanism to do this — list prices in the U.S. are not easily reduced. Rebates and discounts are common tools, but slashing list prices across distribution channels would require complex regulatory maneuvering, potentially involving HHS rulemaking or even litigation if stakeholders push back. Manufacturers that have lowered wholesale acquisition cost (WAC) prices in recent years have run years long programs to ensure patients are able to stay on therapy and there are no disruptions across distribution, pharmacy dispensing, insurance coverage, and patient support programs
In other words, the policy’s ambition collides with the regulatory and structural complexity of U.S. drug pricing systems, which are fragmented across Medicare, Medicaid, commercial insurance, and other employer-sponsored plans.
Balancing affordability and innovation
There’s no question that U.S. patients need better access and affordability. MFN pricing could offer relief in the short term, particularly if direct-to-consumer (DTC) models are enabled. DTC models have significant challenges on their own merit. There simply is no current supply chain to get over 7B prescriptions per year directly to patients without the key role that distributors, pharmacies, and other stakeholders play in the US market. Further, its impractical and potentially dangerous to expect infused, injected, and other physician-administered drugs and vaccines to be sent directly to patients. The key risk in MFN pricing comes in how revenue compression might affect innovation pipelines.
The administration’s unspoken hope is to “meet in the middle”: that U.S. prices come down modestly while international prices more significantly increase, creating an equilibrium that preserves global revenues and supports ongoing R&D investments.
However, getting other countries to raise prices is no small task. Many of these countries have national health budgets and technology assessment frameworks that impose hard caps on pricing. In many European markets, for instance, prices are negotiated based on cost-effectiveness and budget impact — not on what the manufacturer wants to charge. Prescription drug prices and overall healthcare costs are, like the U.S., lightning rod topics in many European countries. While those populations may support increasing, for example, defense spending, any increase in healthcare costs is likely to be met with fierce social and political opposition.
Even when prices abroad are lower than in the U.S., they can still be considered expensive within those countries’ systems, which often operate under fixed budgets for healthcare and prescription drugs. These systems determine prices not only based on clinical benefit but also on how many patients they can afford to treat. In some cases, even a low-cost drug (compared to the U.S. price) may be unaffordable at scale, delaying access or limiting coverage altogether.
And while the U.S. could threaten to expand drug importation beyond Canada, that strategy faces logistical and legal barriers — especially for high-cost biologics and cold-chain drugs with limited foreign supply. It is also unlikely that pharmaceutical manufacturers would ship enough product to Canada or all other ex-US markets to satisfy the amount of product needed for the US population.
Achieving balance between affordability and innovation, both domestically and globally, requires navigating these complex systems. Without meaningful alignment across markets, equalizing prices may remain more aspirational than actionable.
Compliance alternatives
Currently, the MFN EO exists without a clear enforcement mechanism. No law mandates compliance, and litigation is expected if rulemaking attempts to impose pricing mandates—as seen during the Trump administration’s previous MFN attempt for Medicare Part B.
An alternative route could be through the Center for Medicare and Medicaid Innovation (CMMI). CMMI could pilot MFN pricing in a nationwide Medicare and Medicaid program, allowing for limited-scope implementation without new legislation. This pilot approach could also indirectly affect commercial pricing by triggering Best Price resets, which could lower 340B ceiling prices and ripple across payer types. Commercial plans and PBMs could further attempt to leverage those lower government prices as a way to indirectly reduce commercial prices, though similar past efforts have been less successful.
Global trade games: Pharma as the new bargaining chip
One of the most geopolitically sensitive elements of the EO is its implied intent to use trade tactics, including tariffs or export controls — to pressure foreign governments to raise drug prices. It could become a trade game with pharm involved, something that hasn’t happened historically. The trade game involving healthcare is further challenged considering there are APIs, medical supplies, and other products that are not made in the US and for which the US replies upon imports – a scenario where foreign governments threaten to withhold those products from the US in response to US threats doesn’t benefit either side.
This raises a contradiction. On one hand, the administration wants to import cheaper drugs from other nations. On the other, it wants those same countries to raise their prices. If the U.S. ends up buying lower-cost imports while failing to get international prices to rise, pharma could lose revenue from both ends.
The broader cost debate
It’s important to remember that prescription drugs account for roughly 10% of total U.S. healthcare costs. Hospital stays, emergency visits, chronic disease management and administrative overhead make up the rest. With recent medical cost trends showing 8-9% annual increases, even if drug prices fell significantly, total healthcare spending would remain largely unaffected.
Navigating the unknown
The MFN Executive Order is a bold attempt to recalibrate global drug pricing — with U.S. patients at the center. But without clear enforcement, legal grounding, or international cooperation, its future remains very uncertain. Pharmaceutical companies must prepare for litigation, potential trade friction, and a fluid regulatory landscape that may evolve through CMMI pilots or agency rulemaking.
Companies should stay agile, conduct scenario modeling, and prepare for a healthcare ecosystem that increasingly links global affordability to U.S. pricing policy.
This moment calls for more than compliance. It demands leadership — across product strategy, pricing design, and public trust. How the industry responds will shape not just margins, but the future of innovation and access in the U.S. and beyond.
Photo: gerenme, Getty Images
Glenn Hunzinger is a Partner and Health Industries Leader at PwC US. He advises clients across the health industry on strategic, regulatory, and commercial transformation.
This post appears through the MedCity Influencers program. Anyone can publish their perspective on business and innovation in healthcare on MedCity News through MedCity Influencers. Click here to find out how.
