U.S. Drug Pricing Reform Goes Global: Payer Reactions to the Most Favored Nation Policy

As part of the Indegene Digital Summit 2025 (Virtual Edition), an expert panel explored how the U.S. Most Favored Nation (MFN) policy could reshape drug pricing and access globally. Moderated by William Lobb (VP, PRMA & HEOR, Indegene) and Nekshan Dalal (Director, PRMA & HEOR, Indegene), the discussion brought together payer leaders from the U.S., UK, and Germany – Jeff Dunn, James Mahon, and Harald Herholz – who unpacked the global market implications and debated how healthcare systems can balance affordability, access, and continued innovation.

The MFN policy, originally proposed by the U.S. administration and the Centers for Medicare and Medicaid Services, aims to benchmark domestic drug prices to those paid by peer nations – potentially aligning U.S. costs with the lowest international reference price. While the MFN clause seeks to control runaway pharmaceutical spending, panelists agreed that its impact could extend far beyond U.S. borders.

For U.S. payers, the implications are multifaceted. Jeff Dunn, President and CEO of Cooperative Benefits Group (CBG), noted that while the goal of reducing costs is laudable, the U.S. healthcare system’s complexity makes outcomes unpredictable.

He emphasized that drug costs in the U.S. have doubled every four years on average, placing enormous strain on employers, health plans, and patients. Despite scepticism about the MFN’s execution, Dunn acknowledged that “something has to change” as affordability and access approach a tipping point.

The discussion also touched on how Medicare drug price negotiation mechanisms intersect with MFN pricing, creating a new wave of payer uncertainty. Dunn warned that unless reforms are integrated with broader Pharmacy Benefit Manager (PBM) reform initiatives, cost containment could backfire, amplifying disparities in patient access.

Germany, often referenced as one of Europe’s highest-priced markets, faces its own paradox. As Harald Herholz, Ex-Physician, GBA Member and QA Head, Doctor’s Association explained, German payers already shoulder premium prices and are wary of further increases driven by global ripple effects from U.S. policy shifts.

Herholz highlighted Germany’s tradition of rapid access and automatic reimbursement for newly approved drugs, typically within an hour of EMA approval. However, he cautioned that this open-access model could change if prices rise further, with politicians likely to tighten reimbursement catalogs or restrict coverage.

The conversation also touched on the growing role of confidential discounts in Germany. Though permissible for several years, they were rarely used until recently. Herholz predicted that more manufacturers might now leverage confidential pricing to protect margins and manage international reference risks, especially under pressure from MFN policy adjustments and MFN pricing considerations in the U.S.

In contrast, the UK’s payer system has long prioritized cost-effectiveness through the National Institute for Health and Care Excellence (NICE). For James Mahon, a health economist and advisor to both NHS and private sectors, the MFN clause appears economically shortsighted.

Mahon argued that the UK’s transparent approach, including the ability to say no to drugs that don’t meet cost-effectiveness thresholds, creates both discipline and predictability. While Germany reimburses nearly all EMA-approved drugs immediately, the UK’s process filters out high-cost, low-benefit treatments, and the public increasingly understands those trade-offs.

He also underscored that confidential discounts are already common practice in the UK, sometimes reaching 80–90%. This, he said, complicates the MFN’s ability to calculate “true” global reference prices, as many list prices are effectively decoupled from real-world costs. This transparency-driven structure, unlike the fragmented U.S. market, complements broader Medicare drug price negotiation and PBM reform bill discussions that focus on value-based outcomes.

The discussion then turned to the delicate balance between fostering innovation and ensuring affordability. Lower prices, critics argue, could discourage pharmaceutical R&D investment. But panelists noted that innovation should serve both scientific progress and societal accessibility.

“We’ve seen a fundamental shift in R&D, away from primary care and toward rare diseases and oncology,” observed Jeff Dunn. “Drugs are increasingly priced on what the market will bear, not on clinical value. Without transparency on development costs and value outcomes, true innovation becomes harder to measure.”

Herholz emphasized that while Germany’s system supports innovation through high initial prices and early access, it also expects manufacturers to prove added therapeutic benefit. Mahon added that many of medicine’s greatest breakthroughs emerged from academic or chance discoveries, not necessarily from high-profit R&D pipelines.

The consensus: price reforms should encourage genuine, outcome-driven innovation rather than incentivize short-term profitability. Transparency, value-based pricing, and international collaboration – supported by policy tools such as the 340B program and responsible PBM reform – will be critical to achieve that balance.

The panelists acknowledged that the MFN policy does not exist in isolation – it intersects with other U.S. reforms such as the Inflation Reduction Act (IRA),  the 340B program, and evolving PBM reform bill proposals. Dunn highlighted that while PBMs are often portrayed as “middlemen,” their negotiating role actually helps stabilize costs and ensure access.

He emphasized that the broader challenge lies in the misaligned incentives that exist across the healthcare ecosystem – among brokers, providers, and payers alike. Real progress, he suggested, will depend on aligning these interests and sharing risk across the system rather than expecting any single policy to fully address affordability concerns.

Herholz and Mahon echoed similar sentiments about misalignment – though their systems differ vastly, all agreed that piecemeal reforms without systemic coordination tend to fail. Mahon added that if the U.S. cannot centralize its purchasing approach, it will continue to face cyclical price pressures and patchwork solutions.

Herholz further cautioned that an MFN-driven price alignment could lead to selective market withdrawals by manufacturers in Europe, though parallel import mechanisms within the EU might cushion such shocks.

In the concluding segment, panelists debated whether the MFN policy is even executable in practice, or merely a political signal. Despite its complexity, all agreed it has catalyzed a much-needed conversation on global drug pricing fairness.

“The short-term answer might be confidential discounts or transitional pricing,” said Harald Herholz. “But the long-term solution must preserve value-based systems. We cannot compromise evidence-based assessment for political optics.”

Mahon argued that true global equilibrium will remain elusive without structural change in the U.S. market. “You need a counterbalance to monopoly suppliers – a monopsony purchaser. Until then, price control will remain aspirational,” he said.

Dunn, while pragmatic, struck a hopeful note, urging collaboration: “We need to de-silo the system, align incentives, and share risk, not just across U.S. stakeholders but globally.”

The panel concluded that while the Most Favored Nation Policy might not dramatically lower domestic drug costs, its symbolic impact could spark new international dialogue on fair pricing. It underscored the interdependence of global markets – where a U.S. pricing reform can reverberate through European payer systems, influence innovation incentives, and reshape access strategies.

The Indegene Digital Summit 2025 discussion revealed that every stakeholder – from regulators and payers to manufacturers and policymakers – has a role to play in redefining value, transparency, and access. Whether through confidential pricing, outcome-based contracts, or risk-sharing models, collaboration across borders will be essential to sustain both affordability and innovation in the years ahead.