A modeling study in The Lancet reveals that the U.S. Medicare Most-Favored-Nation pricing policy, which ties U.S. drug payments to lower international benchmarks, could disrupt global pharmaceutical markets. Because projected U.S. savings are nearly four times larger than a drug's entire annual sales in reference countries, manufacturers have a strong incentive to delay launches or raise prices abroad to protect U.S. revenues. Meanwhile, confidential side deals with 26 drugmakers threaten to cut U.S. savings by up to 80%.
Medicare Most-Favored-Nation pricing policy
- ▪A modeling study published in The Lancet analyzed 195 patented medicines accounting for $87.9 billion of Medicare's annual spending to evaluate the Most-Favored-Nation policy.
- ▪Under the GLOBE and GUARD pricing models, a randomly selected 25% of Medicare beneficiaries are covered over a five-year period.
- ▪The U.S. Medicare Most-Favored-Nation pricing policy aligns what Medicare pays for brand-name medicines with prices in comparable high-income countries, adjusted for purchasing power.
- ▪The U.S. Medicare Most-Favored-Nation policy operates through two pricing models: GLOBE, covering medicines given in hospitals and clinics, and GUARD, covering medicines bought at pharmacies.
Projected Medicare savings
- ▪Expanding the Most-Favored-Nation rules to cover all Medicare beneficiaries could raise projected savings to $21 billion under GLOBE and $25.5 billion under GUARD.
- ▪Without exemptions, Medicare is projected to save $5.2 billion (16%) under GLOBE and $6.4 billion (18%) under GUARD during the initial phase of the Most-Favored-Nation policy.
- ▪The lowest international benchmark price used by Medicare was found to be 71% lower than what Medicare pays, with South Korea, Norway, and Australia referenced most commonly.
Manufacturer exemption agreements
- ▪Confidential deals between 17 pharmaceutical manufacturers and the Trump administration are projected to cut the Most-Favored-Nation policy's overall Medicare savings by 71%.
- ▪An updated estimate by study author Thomas Hwang indicates that a total of 26 companies have struck confidential deals, raising the projected savings loss to nearly 80%.
- ▪The 17 pharmaceutical companies with announced confidential agreements account for 131 of the 195 medicines studied, representing 67% of the analyzed cohort.
Global drug launch delays
- ▪Manufacturers may attempt to evade the U.S. pricing benchmarks by developing different formulations, converting existing discounts into confidential rebates, or delaying launches.
- ▪To avoid losing U.S. revenue, drug manufacturers have a strong incentive to delay drug launches in lower-priced reference markets to prevent those prices from being visible to Medicare.
- ▪For about 75% of the medicines analyzed, the projected Medicare savings exceed the medicine's entire annual sales in the country used to set its U.S. reference price by nearly four times.
European market access impact
- ▪Under updated European Union pharmaceutical rules, a company must launch a new medicine within three years if requested by a country or risk losing two years of monopoly rights.
- ▪The European Health Commissioner was tasked by health ministers in mid-June 2026 to assess the impact of the U.S. Most-Favored-Nation policy on drug launches and pricing in the EU.
- ▪In the 10 months following the U.S. Most-Favored-Nation executive order, drug launches in European Union markets fell by approximately 35% compared with the previous 10 months.
- ▪A severe high cholesterol treatment drug was withdrawn from the Danish market in February 2026, with observers attributing the withdrawal to the U.S. drug pricing policy.
Pharmaceutical pricing pressure
- ▪Referenced countries including Germany, Japan, and Australia are facing substantial pressure from the U.S. administration and industry to raise prices and spending on medicines.
- ▪Astellas Pharma secured higher drug prices in Japan in March 2026 by arguing that lower domestic prices would negatively influence its U.S. pricing under the Most-Favored-Nation policy.
Debatable claims
- ▪Medicare should tie US drug prices to international benchmarks
- ▪European governments should increase drug spending to prevent launch delays
- ▪The EU should strip monopoly rights from drugmakers delaying launches
- ▪The US government should ban confidential drug-pricing side deals
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