The US system of private, market-based pricing is the foundation of America’s global leadership in biomedical innovation. Proposals to import government price controls from wealthy foreign trade competitors into US programs, including Medicaid or Medicare, ignore the extraordinary value that the US pricing system delivers to patients, employers, taxpayers, and health plans.

Rather than undermining innovation at home, policymakers should instead ensure that foreign nations stop free-riding on US scientific investment and leadership. US leaders should prioritize trade reform that prevents our wealthy foreign competitors from using faulty and outdated health economic schemes that function as barriers abroad.

Watch this video from leading investors and read below to see how importing foreign price controls negatively impacts US biomedical leadership. They lay out clearly that they, too, resent European freeriding but see that MFN is not the solution; it will only backfire on America.

The US Market-Based System Fuels Global Biomedical Innovation

• America’s private-sector pricing model supports over 70% of global biopharmaceutical R&D, enabling the discovery of breakthrough treatments and cures that benefit patients worldwide.

Market-Based Pricing Delivers Exceptional Value

• Innovative medicines account for just 8 cents of every US healthcare dollar, yet incentivize all investment in future medicines. Innovative medicines prevent far more expensive hospitalizations, surgeries, and long-term care, which saves money across the system, especially since medicines go generic.

• US net drug prices are rising at just 0.4% per year while hospital costs, which will never go generic, are rising at 7% per year or more.

• On average, US prices are 70% below the full societal benefit these therapies provide. In other words, even the US is getting a bargain on medicines compared to the alternative of not having them. MFN will backfire by robbing the US of that bargain.

Investment Relies on Predictable, Market-Driven Pricing

• When policymakers threaten to import arbitrary price caps, it sends a clear message to investors: stop funding the next generation of cures. Early-stage R&D and small molecule development are particularly at risk.

Foreign Free-Riding Has Real Economic Consequences

• Countries like Canada and Germany use outdated health technology assessments to set prices 90-94% below the value delivered by innovations whose development was largely incentivized by the prospect of high-margin revenues in the US market while medicines are on-patent (13-14 years on average).

• If just five wealthy trade competitors (Japan, Germany, France, UK, and Italy) paid their fair share, economists estimate that the expanded global market for medicines would attract more R&D investment and result in the discovery and launch of at least 12 more new drugs every year. More medicines means more competition in all geographies, and more competition is what brings prices down.

• Getting other countries to pay more would likely bring prices down in the US through more R&D and more competition among drugs. Unfortunately, MFN doesn’t get other countries to pay more.

The Wrong Approach: Importing Foreign Price Controls

Bringing foreign-style price controls into US programs, including Medicaid or Medicare (with likely spillovers into 340b and commercial markets), would:

• Undermine the market-based ecosystem that sustains US biomedical progress and leadership.

• Validate foreign price controls based on arbitrary, static formulas that ignore real-world quantifiable patient and societal benefits (e.g., drugs go generic, productivity is restored to patients and caregivers, novel treatments reduce risk for everyone), importing myopic central planning to the US.

• Slow innovation and restrict patient access to new therapies, condemning Americans to relying more on hospitals and services, which, unlike drugs, don’t go generic and therefore drive up costs.

Negative Impact on Biopharmaceutical R&D

The interconnectedness of pricing for medicines throughout the US market means that imposing foreign price controls to even a small part of the US market is far more impactful than may be obvious at first glance.

• Using MFN to link prices to Europe or Canada would be catastrophic to R&D investment. The IRA’s pill penalty already reduces expected return on investment for targeted medicines by 40%, foreign price controls would make any investment in new medicines not worthwhile. 

• MFN would have implications far beyond government programs because those prices spill over into the commercial market -- for example into the 340B program in Medicaid or provider payment in Medicare.

• Investors would invest in any other industry but medicines. Americans would suffer.

• We are all patients eventually. And our premiums would only climb because of hospital costs we failed to avoid through biomedical innovation.

Negative Impact on Generic Drug Pipeline

90% of the prescriptions filled in the US are generic drugs whose original patents have expired. We would not be better off without them.

• If MFN price controls had been imposed in the 1970s and discouraged the funding of every new drug launched since then, the resulting inexpensive generics we rely on for long-term savings would not exist either.

• Life threatening conditions that have been cured or turned into inexpensively manageable conditions would still be a huge financial burden, robbing Americans of their productivity and joy.

Time to Stop Free-Riding by Wealthy Foreign Countries

Europe has been freeriding on the US markets that incentivize innovation for too long.

• Europe’s lower prices have been better than nothing for investors, but not if they come at the expense of sustaining current levels of innovation.

• MFN would most likely result in other countries pitching in even less than they have, which would leave Americans paying only more.

• MFN is not the solution to foreign free-riding. It will harm, not help American economic or societal health.

The Right Solution: Trade Reform, Not Price Importation

The US must protect its market-based pricing system and hold wealthy foreign governments accountable for their role in global health financing. Under President Trump’s “America First” Trade Policy, the US Trade Representative (USTR) should:

• Eliminate non-tariff market access barriers that delay or deny access to US medicines abroad.

• Ensure timely access to US innovations for foreign patients by removing biased foreign price controls on new medicines. In other words, negotiate with other countries to get them to adopt the use of new medicines sooner.

• Make sure high income ex-US single-payor governments benchmark their price controls closer to prices set by the US’s true, multi-payor competitive market-based system.

If our trade partners want the US to buy products that matter to them (in any industry), require them to pay their fair share for medicines and stop free-riding on US-funded biomedical R&D.