CSIS article review on Most-Favored Nation Policy

The Center for Strategic and International Studies (CSIS) is an American think tank based in Washington, D.C. I follow their website, and yesterday there was a good article by Dr. Anne McDonald Pritchett, titled 'How Most-Favored Nation Policy Could Undermine U.S. Leadership.' Dr. Anne McDonald Pritchett, PhD, is the founder of Pritchett Policy Associates, LLC, which offers expertise in life sciences, policy, advocacy, and strategic communications to address public policy challenges. She is a leading expert on the biopharmaceutical manufacturing supply chain and on various public policies affecting biomedical innovation, including intellectual property, cybersecurity, STEM, and economic and regulatory guidelines. The article raises concerns about the potential negative effects of the May 2025 Executive Order (EO), which aims to reduce prescription drug prices in the United States by benchmarking them against prices in other developed countries. The author contends that this policy, known as "Most-Favored-Nation" (MFN) pricing, effectively enforces price controls that could hinder innovation and damage the U.S. biopharmaceutical industry. The author contends that the U.S. leads in biopharmaceutical innovation due to strong intellectual property rights, substantial investment in research and development (R&D), and a market-driven system that encourages competitive drug prices. This leadership faces threats from the EO, which could reduce the profitability of new products, hinder R&D investment, and lead to fewer new medicines and potential shortages. The article draws a parallel to the decline of the French pharmaceutical industry in the late 20th century due to price controls. It also highlights the growing challenge from the Chinese pharmaceutical industry, which is strategically focused on biopharmaceutical development, increasing innovation, and dominating the production of critical drug ingredients. The EO defines MFN as a group of Organization for Economic Co-operation and Development (OECD) countries with a per capita gross domestic product (GDP) that is 60 percent or more of the U.S. per capita. The U.S. Department of Health and Human Services (HHS) is expected to create a list of countries that will serve as "MFN" targets. The author argues that these comparator countries likely negotiate drug prices directly with biopharmaceutical manufacturers or simply cap prices by law, which could limit access to new medicines. The author cites concerns raised by stakeholders about the potential for the policy to limit or restrict access to new medicines, reduce research and development (R&D), and harm the U.S. R&D ecosystem and economic benefits. Studies suggest that MFN-type price controls could significantly reduce the number of drugs developed by small and emerging biotech firms, potentially eliminating industry-supported jobs. The article also mentions that the Congressional Budget Office (CBO) anticipates that price controls would lead to a reduction in manufacturers' revenues, resulting in lower spending on research and development and reduced introduction of new drugs. Manufacturers may also adjust their launch strategies to circumvent U.S. price controls. Furthermore, the article suggests that price controls, combined with high and unpredictable tariff rates, could discourage future investments in U.S.-based manufacturing. The author notes that China has been rapidly increasing its launch of new novel active substances and could become the next global leader in biopharmaceutical R&D and innovation. In conclusion, the author recommends that the Trump Administration reconsider adopting MFN-pricing policies and instead explore alternative strategies, such as trade negotiations, to ensure foreign governments contribute their fair share for medicines. They also propose developing a "NATO-like alliance of drug prices" and creating a more level playing field by urging the European Union to establish a "Europe-wide spend target" for innovative medicines and vaccines. Finally, the author emphasises the importance of evaluating potential unintended consequences of creating a significant competitive advantage for China in future medical advances.