President Trump has made no secret of his desire to employ Most Favored Nation (MFN) pricing for American pharmaceuticals to reign in drug costs. But tying the U.S. to prices in Europe would restrict Americans’ access to new medicines—just as it has in Europe. Rather than importing Europe’s failed ideas, President Trump and Congress should focus on the domestic policies driving U.S. drug prices up.
MFN is effectively an extreme version of Europe’s pharmaceutical reference-pricing system, in which countries cap drug prices based on the prices in other European nations. The difference with MFN is that, instead of using averages or formulas, the U.S. price would be pegged to the lowest price in any reference country.
Given the similarity in policy, Europe’s results offer a clear warning. While European countries achieved modest short-term cost savings, price caps predictably caused delays in launching new medicines and undermined pharmaceutical research—reducing access to innovative treatments in numerous countries.
All price controls come with problems. But when governments set prices by referencing other countries, drug manufacturers maximize their revenue by delaying launches in low-price markets to avoid dragging down the prices in higher-value markets. This is precisely what has repeatedly delayed drug availability in Europe. Applying MFN pricing in the U.S. would put American patients in the same position—and would harm access for millions of patients in any country whose prices determine U.S. benchmarks.
Delays are only the beginning. In the long term, price-cap systems weaken innovation and leave patients without future treatments. Drug development takes years of work and billions of dollars in investment. Undermining the profitability of new medicines reduces the incentive pursue that research—precisely what Europe has experienced.
Applying MFN to all medicines would be catastrophic for the pharmaceutical industry. Not only would name-brand manufacturers have less reason to develop new drugs, but generic manufacturers—already operating on razor-thin margins—would exit markets where reimbursement is too low. Price caps erode generic viability, shrinking supply and increasing the risk of shortages.
Even applying MFN narrowly would distort the market. Manufacturers would have every reason to lobby to have competitor’s drugs included, knowing it would undermine their profitability. Concentrating that much pricing power in Washington ensures companies will invest more in political maneuvering and less in developing new medicines.
There are solutions that reduce drug prices without sacrificing access or innovation—but they rely on market forces, not government dictates. Pharmacy benefit manager (PBM) transparency would ensure patients can access the least expensive available medicines instead of the higher-priced ones PBMs profit from. Price transparency would allow patients to pay the lowest available price—especially when cash prices are lower than insurance copays. Direct-to-consumer pharmaceutical sales would let patients purchase medicines directly from manufactures, bypassing the layers of intermediaries that inflate prices. Unlike MFN, these reforms can lower costs while preserving incentives to develop the next generation of lifesaving medicines.
MFN pricing simply imports Europe’s flawed system, outsourcing U.S. drug-price decisions to foreign governments. Instead of copying a bad plan, President Trump and Congress should work to make America’s pharmaceutical market freer—ensuring patients have access to safe, effective, and affordable medicines, not empty shelves.
