The impact of the PBM/Insurance industry is mentioned very little in the article and not until near the end of the article. Little/no mention of lower profit margins for that part of our drug distribution system that other countries do not have within their healthcare system.

Most Favored Nation’ Pricing May Cut Drug Costs. It May Also Cut Off Rural America

 

https://www.medpagetoday.com/opinion/prescriptionsforabrokensystem/119052

The system is far more complex than Trump’s proposal conveys

Americans pay too much for prescription drugs. On that point, there is almost universal agreement.

In 2019, the U.S. spent more than $1,000 per person on prescribed medicines — more than any other high-income nation. An Organization for Economic Cooperation and Development (OECD) analysis put U.S. per-capita retail pharmaceutical spending at more than twice the OECD average. The Kaiser Family Foundation has shown Americans often pay more for the same drugs that cost far less across Europe and other wealthy countries.

Prices must come down, but how we get there matters. A lot.

The Trump Administration’s Proposal

In November, the Trump administration resurrected a Most Favored Nation (MFN) reference pricing policy, which would tie drug prices paid in the U.S. to the lowest prices paid in other developed countries. The White House has sold the idea as a tough negotiation tactic for bloated drugmakers and a gift to patients at the pharmacy counter.

Tie U.S. prices to those in other countries, the logic goes, and Americans will finally stop being the world’s ATM for brand-name drugs.

The plan outlined in November is an agreement between the U.S. and two pharmaceutical manufacturers, Eli Lilly and Novo Nordisk, and it concerns only a handful of drugs. But these prescriptions — for weight-loss drugs — represent the highest annual expenditures in the U.S.

According to the White House, under the president’s plan, the prices of semaglutide (Ozempic and Wegovy) will fall from $1,000 and $1,350 per month, respectively, to $350, while the price of tirzepatide (Zepbound) and orforglipron (if approved) will fall from $1,086 per month to an average of $346.

Sounds great, right? Let’s go deeper.

MFN Pricing Will Destroy Healthcare in Rural America

Because MFN does not operate in a vacuum, the president’s plan is dangerous.

Indeed, the MFN plan will sit on top of a landscape where rural hospitals are closing, small pharmacies are fragile, Medicaid is under pressure, NIH budgets are being cut, tariff threats inject uncertainty into global supply chains, and FDA practices have become less predictable for innovators.

Layer MFN on top of that landscape, and you do not just squeeze drug company margins — you compress the ecosystem that gets life-saving drugs to people. And that ecosystem is weakest in the very communities that can least afford another hit.

Consider a hypothetical, but familiar, patient: a 63-year-old woman in a rural county who relies on an infused biologic for rheumatoid arthritis. Her local independent pharmacy closed last year. The nearest hospital with rheumatology and infusion services is 90 minutes away. She lives on a fixed income; her copay assistance and manufacturer bridge program are the only reasons her treatment is sustainable.

Now dial in MFN. It is not that, amid price compression, a company will sit in a boardroom and say, “Let’s cut off rural patients.” But every thin margin in the distribution chain will get thinner. Wholesalers will negotiate harder. Pharmacies will drop low-volume products. Assistance programs that do not directly show up in a stock price get trimmed. When an infusion suite decides which therapies to carry, the high-complexity drug used by a small panel of rural patients will not be at the top of the list.

Incremental decisions will slowly erode care in rural communities.

Urban centers will likely be more resilient in the short term. Greater provider density, stronger hospital networks, and the presence of academic medical centers and specialty pharmacies mean that large cities can better absorb some shocks. Patients in Boston or San Francisco may see lower prices and relatively stable access — at least initially.

But MFN cannot insulate those cities from broader consequences. If MFN, coupled with tariff threats and regulatory volatility, makes the U.S. a less predictable market for high-risk innovation, investment will slow. If price compression contributes to drug shortages — a problem that has already been worsening for generics and sterile injectables — those shortages will hit big cities and small towns alike. And while urban centers have more hospitals, they also have deeper structural disparities. Lower prices alone have never been enough to fix that.

MFN Threatens Innovation, Especially for Rare Diseases

Speaking of innovation: the U.S. accounts for a disproportionate share of global pharmaceutical revenue and, in turn, global research and development. RAND estimated that in 2022, the U.S. represented 62% of total drug sales across OECD countries, but only 24% of volume.

That gap is precisely what funds the high-risk, high-cost development of new therapies.

We are already seeing how aggressive price regulation can delay or dilute access to innovative drugs. Analyses of external reference pricing (ERP) in Europe showed that when countries peg prices to one another, manufacturers often delay launches or skip smaller markets entirely rather than lock in lower prices. One study found ERP was associated with a 73% reduction in the likelihood of launching a drug within 9 months of regulatory approval.

The problem is even more acute for orphan drugs. European Federation of Pharmaceutical Industries and Associations (EFPIA) data show that patients with rare diseases often face years-long delays after European Medicines Agency approval — or never see certain drugs launched at all — because price regulation and fragmented country-by-country negotiations make it unattractive to bring those therapies to smaller markets.

If we import the most aggressive pieces of that model without creating stronger safety nets, we risk importing the delays and access problems while retaining our underlying inequities.

It’s Time for Whole System Reform

Americans want lower drug prices. Kaiser polling consistently finds large majorities of both Republicans and Democrats support policies like allowing Medicare to negotiate prices.

But the price a patient pays at the register is more complex than a politician’s talking points portray. Prices are the reflection of a byzantine system of rebates, pharmacy benefit manager (PBM) negotiations, insurance design, and manufacturer assistance programs. When you crush prices at the top without redesigning the plumbing underneath, the system will not suddenly become fair. It will become brittle.

Manufacturer-funded assistance programs are a prime example. Companies spend billions each year subsidizing access for low-income and underinsured patients. If MFN cuts revenue sharply, these programs will get cut first. The Americans already skipping doses because of cost — nearly one in seven, in some surveys — will be the first to feel those cuts.

We absolutely should not accept a status quo, but if we want to fix drug pricing without sacrificing equity and innovation, we need a balanced approach. We need real oversight of PBMs, transparency in the rebate system, support for rural pharmacies and hospitals, sustained NIH funding, stable FDA leadership, and coverage expansions that ensure people are insured.

Otherwise, MFN will not stand for “Most Favored Nation.” It will mean “Most Forgotten Neighborhood.”

Filed under: General Problems