Most-Favored-Nation Drug Pricing: What CHROs Need to Know

This week the President issued an Executive Order titled “Delivering Most-Favored-Nation Prescription Drug Pricing To American Patients.” The order seeks to significantly reshape pharmaceutical pricing policy in the United States by requiring drug manufacturers to offer American consumers the “most-favored-nation” (MFN) pricing—meaning the lowest price charged for a drug in any comparably developed country. 

• The Administration argues that Americans pay up to three times more for the same drugs, even as they are often manufactured in the same facilities abroad. 

Key Objectives: The order targets what it characterizes as “global freeloading,” where foreign countries negotiate steep discounts on pharmaceuticals while American consumers—through both public programs and private plans—effectively subsidize the cost of global drug innovation. 

• Mandating MFN Pricing: Within 30 days, HHS will set price targets and begin engagement with drug manufacturers. If voluntary compliance is not achieved, the Administration may propose formal rulemaking to enforce MFN pricing. 

• Direct-to-Consumer: HHS will facilitate programs to allow Americans to purchase drugs directly from manufacturers at MFN pricing. 

• Drug Importation: The Administration may certify that importing prescription drugs from countries with lower costs is safe, which would enable case-by-case importation waivers. 

• Trade and Antitrust Enforcement: Agencies including the FTC and DOJ will pursue anti-competitive practices, while the Department of Commerce may consider action on pharmaceutical exports that contribute to global price discrimination. 

Why it matters: While the EO is directed primarily at federal agencies and public programs, it signals broader market disruption that employers and health plan sponsors must monitor closely: 

1. Potential Pricing Shifts Across the Market - If MFN pricing takes hold—either voluntarily or through regulation—employers could see lower prescription drug costs in employer-sponsored health plans. However, this depends on whether PBMs and insurers can effectively leverage those pricing changes in negotiations with manufacturers. 

2. Supply Chain Considerations - The EO opens the door to expanded drug importation. While promising lower prices, this could introduce regulatory and safety complexity for employer plans, particularly self-insured plans that are considering international sourcing strategies. 

3. Plan Design Flexibility and Compliance - Any new HHS rules or FDA approvals stemming from this order may affect formulary design, cost-sharing arrangements, and overall compliance obligations for plan sponsors. CHROs should remain engaged with benefits teams and third-party administrators to monitor evolving compliance requirements. 

4. Policy Uncertainty and Litigation Risk - Like previous attempts at MFN pricing models, this EO is likely to face legal challenges from industry stakeholders. As such, any changes could be delayed or blocked.  

Looking ahead: If pharmaceutical manufacturers do not voluntarily comply with EO, the Administration is expected to initiate formal rulemaking to enforce the policy. 

• It appears increasingly likely that Congress will revisit PBM reform. This week, the Senate Judiciary Committee held a hearing on PBMs, with lawmakers from both parties voicing concern over their role in inflating drug costs, restricting patient access, and contributing to the closure of independent pharmacies. 

Notably, Congress came close to advancing significant PBM reforms in last December’s spending bill, but the provisions were ultimately removed following criticism from Elon Musk. 

HR Policy Association will continue to monitor these developments and keep members informed of any policy changes that may impact employer-sponsored health plans, especially if PBM reforms are added to the pending reconciliation bill.