On May 12, President Trump signed an Executive Order (EO) that directed drug manufacturers to reduce US drug prices to align with those paid in economically comparable countries, a concept known as international reference pricing or Most-Favored Nation (MFN). The EO outlines a series of near-term steps the federal government may take to make manufacturers lower their US drug prices. These include implementing a voluntary direct-to-consumer (DTC) purchasing model based on MFN price targets and potentially enforcing MFN pricing through regulations and barring of manufacturer actions, among other administrative measures.  

“This announcement makes it clear that MFN pricing is back on the table, and organizations should act now to model policy scenarios, assess exposure, and think through palatable alternatives to mitigate potential disruption across pricing, access and channel strategies,” said Milena Sullivan, Avalere Health’s Policy Practice Director. “Policy, market access, legal, and commercial teams will need to collaborate to effectively navigate the complexities of an MFN threat” she added. 

Background 

The first Trump administration undertook efforts to tie US drug prices to those in economically comparable countries, with proposed rulemaking for the International Pricing Index model in 2018 and the Most-Favored Nation model in 2020. These demonstrations aimed to limit overall Medicare spending by aligning provider payment for Part B drugs with that of equivalent countries. At the time, stakeholders expressed concern that these models would limit or restrict access to newer drugs, and the Centers for Medicare and Medicaid Services did not proceed with either model. Now, the second Trump administration has decided to revisit its focus on MFN pricing with a range of administrative actions.  

The most recent MFN EO released by the White House was followed shortly by an announcement from the US Department of Health and Human Services (HHS) that it is taking immediate steps to implement the order. The HHS press release also stated that the administration would focus on MFN targets based on the lowest price in an OECD country with a per capita gross domestic product of at least 60% that of the United States. Based on 2023 data, the countries that fit within that threshold include Luxembourg, Ireland, Norway, Switzerland, Netherlands, Iceland, Denmark, Australia, Austria, Germany, Belgium, Canada, Finland, France, UK, Italy, Israel, Slovenia, New Zealand, Spain, Czech Republic, Korea, Lithuania, and Japan.  

What Is Unique About the MFN EO?  

The EO outlines a series of near-term steps the federal government may take to lower drug prices. It differs from prior approaches in several ways:  

• Phase-In Strategy: The EO introduces a two-phase strategy—voluntary compliance first, then escalation to regulation or enforcement. 

• DTC Purchasing: The order directs HHS to explore a voluntary DTC purchasing pathway where manufacturers can offer MFN-aligned prices directly to patients, which could have a significant impact on payers, pharmacy benefit managers (PBMs), pharmacies, providers, wholesalers and distributors. 

• Broad Reach: Unlike prior proposals focused on MFN pricing for Part B drugs, the EO leaves the door open for wider application across a wide range of drugs or therapeutic areas and potentially extending into the commercial market through voluntary tools. 

• Multiagency Implementation: The EO calls for explicit coordination across multiple federal agencies, with a whole-of-government approach to implementation that also integrates trade policy, importation authority, and antitrust enforcement.  

• Geopolitical Framing: The policy approach relies on a broader use of executive and trade powers, with language addressing “global freeloading” with a more overt geopolitical framing of drug pricing, aligning it with broader economic and national security concerns. 

Market Access and Channel Implications 

The novel DTC approach has potential implications for the drug value chain and for distribution models. It remains unclear whether this approach would solely impact pricing at the point of care or involve alternative purchasing and channel impacts. In either case, it is important to consider how potential growth of the DTC approach could interact with insurance design, formularies, existing contracting, and patient assistance. 

As Omar Hafez, US Market Access Practice Director explained, “Leadership teams should view this as a pivotal signal: pricing decisions, launch sequencing, and contracting approaches may all need to evolve to remain competitive under an MFN-influenced environment.”  

This shift presents both a threat and an opportunity. “While MFN pricing may compress margins in traditional models, it could also open the door to new contracting, DTC, or value-based arrangements that reach more patients, increasing the demand side of the equation,” noted Mina Allo, Managing Director, US Market Access, “In response to this new policy, organizations need to robustly analyze the total impact, assess opportunities to mitigate and explore innovative solutions.” 

US Market Access Principal Jessica Cortez explained, “The EO’s push for MFN-aligned pricing could prompt a reevaluation of patient access and affordability strategies, especially if lower voluntary prices reduce the perceived need for copay support.” She added “This shift should be navigated in a way that does not risk leaving some patients without the safety nets they currently rely on.” 

MFN could create disruption across the prescriber, payer, pharmacy continuum. Mark Newsom, Managing Director, Policy, highlighted that, “If the administration proceeds with an MFN model or otherwise facilitates an MFN DTC approach, plans and PBMs need to carefully consider the impacts on their bidding behavior, plan payment including risk adjustment, and network contracting with pharmacies and Part B providers.”  

Pricing Considerations 

Stakeholders should consider how MFN pricing benchmarks may be determined and how the interplay between MFN pricing and other pricing metrics may play out. “Manufacturers and payers alike should view this as a clear signal to re-evaluate pricing strategies and prepare for a potential paradigm shift for the supply and value chain dynamics in the US market.” said Mike Ciarametaro, Managing Director, Policy. This paradigm shift will also have significant ramifications for pipeline assets.  

Tim Wright, President of Global Market Access, emphasized that, “Global pricing strategy can no longer be siloed—US policy is signaling that international prices may soon carry direct implications for access, revenue, and market entry strategies.”  

Further, the introduction of MFN-aligned DTC pricing raises complex questions about how these price points may interact with existing government pricing metrics. “Manufacturers will need to carefully evaluate how voluntary discounts offered under this model could create ripple effects across Medicaid, 340B, and federal supply schedules, potentially triggering broader financial and compliance implications.” explained Margaret Scott, Principal, Policy. 

Direct-to-Consumer Trends 

Independent of the MFN EO, some drug manufacturers have been pursuing direct-to-consumer  channels as a new strategy to reach patients. This shift is driven by a mix of market dynamics, consumer behavior changes, and structural inefficiencies in the traditional pharmaceutical supply chain. “While not an option for every therapeutic area or drug type, DTC approaches are viewed by some manufacturers as a way to bypass intermediaries, set transparent prices, and potentially offer lower out-of-pocket costs to consumers while preserving margins,” said Mark Gooding, Managing Director, US Market Access. 

Patients are also increasingly demanding more convenience, which has given rise to a range of digital health platforms, telemedicine, and online pharmacies in response to consumer expectations for on-demand healthcare. According to Roshan Rahnama, Executive Vice President and head of Access Marketing, “In cases where traditional access channels are heavily restricted by formulary exclusions, prior authorizations, or rebate-driven incentives, President Trump’s call to HHS to facilitate a DTC model may give some manufacturers an option to gain control over pricing, improve patient access and adherence, respond to market restrictions, and better compete in a digital-first healthcare landscape.” 

Federal and State Policy 

Manufacturers, health plans, patient advocacy groups and other stakeholders are expected to engage with policymakers to provide input on the EO’s implementation. Issues such as access to medications, the impact on innovation, and the practicality of DTC models will likely be central to these discussions.  

“While Most-Favored Nation pricing would introduce new cost pressures, some manufacturers may be able to blunt part of the impact through innovative access strategies and differentiated launch planning. But these innovative strategies in turn raise a range of policy, regulatory, and legal questions that stakeholders will need to shape,” said Kolton Gustafson, Principal, Policy Practice.  

With the administration showing a willingness to move beyond voluntary reforms, “Stakeholders should also be preparing for a regulatory pathway that could rapidly accelerate implementation of MFN pricing mechanisms.” says Megan West, Managing Director, Policy. “It is also critical to evaluate the downstream implications of a voluntary MFN approach on Medicare drug negotiations under the Inflation Reduction Act” she added. 

The federal push toward MFN pricing could also create new pressure points or conflicts for states pursuing their own drug pricing transparency laws, affordability boards, or reference pricing frameworks. Emily Donaldson, Principal, Policy, recommends that, “As federal and state policies increasingly overlap, stakeholders should anticipate greater complexity in compliance, reporting, and price governance across jurisdictions.”  

Next Steps 

Biopharmaceutical companies and payers face key decisions in the upcoming months, including deciding whether to participate in a voluntary MFN model, developing and executing policy strategy to shape these changes, and evolving their business and portfolio strategies to reflect new market realities.  

Avalere Health’s seasoned experts in market access, US and global pricing strategy, and federal and state policy support organizations with a range of tailored activities, including: 

• Analysis of the feasibility of participating in a voluntary MFN program
• MFN implementation scenarios and implications for both policy and business strategy 
• DTC strategies landscape, benchmarking assessment and program design  
• Portfolio impact and risk assessments 
• Assessment of the implications of MFN program participation on IRA Medicare negotiation  
• Stakeholder mapping and engagement planning 
• Support for public comments and federal engagement 
• Product level access and pricing strategy, both US and global 

With robust access to domestic and international pricing data, latest Medicare utilization data, and in-country experts across several key markets, we are well-positioned to support you across a number of areas. Connect with us to learn more.