TL/DR –
A study published in The Lancet suggests that pricing policies proposed by the Trump administration, dubbed the ‘Most-Favoured-Nation’ models, could reshape the global pharmaceutical industry by creating an incentive for manufacturers to raise drug prices outside the US and delay launches. The models tie Medicare’s drug prices to those in other high-income countries, which could cut Medicare’s prescription drug spending by up to 18%. However, confidential deals with manufacturers could cut the policy’s Medicare savings potential by 71%.
US Medicare’s New Pricing Policies Could Reshape Global Pharmaceutical Markets, Study Suggests
According to a new study published in The Lancet, the Trump administration’s proposed ‘Most-Favoured-Nation’ pricing policies could significantly alter the global pharmaceutical landscape. The study suggests that the new policies might compel pharmaceutical companies to increase prices and delay product launches worldwide.
At the heart of the issue is the administration’s move to restructure Medicare pricing for drugs. The new pricing models would mandate pharmaceutical companies to pay additional rebates if Medicare prices for drugs exceed those charged in comparable high-income nations.
The study’s projections indicate that for three out of every four medicines studied, the reduction in estimated Medicare savings resulting from benchmarking to a lower price exceeded the medication’s total annual sales in the reference nation. This scenario could incentivise manufacturers to raise prices outside the US or delay product launches to avoid revenue loss.
Analyses also showed that if the medicines of the initial group of 17 manufacturers who struck confidential deals with the Trump administration are exempt from these rules, the resulting savings could be slashed by 71%. Without such exemptions, the ‘Most-Favoured-Nation’ pricing models could decrease Medicare spending by 16% for medicines provided in hospitals and clinics and by 18% for drugs purchased at pharmacies.
Medicare, the US government health insurance programme, covers roughly 68 million older and disabled individuals living in America. Historically, Medicare was not allowed to negotiate medicine prices directly with manufacturers. The 2022 Inflation Reduction Act changed this, authorising Medicare to negotiate prices for a small number of costly drugs.
The Trump administration’s ‘Most-Favoured-Nation’ policy extends this further by aligning Medicare payments for brand-name medicines with prices in high-income countries, adjusted for purchasing power. Under the GLOBE and GUARD pricing models, a randomly selected 25% of Medicare beneficiaries would be covered over five years.
Lead author of the study, Prof. Thomas Hwang of Brigham and Women’s Hospital, stated, “The Trump administration’s Most-Favoured-Nation pricing models have the potential to deliver real savings to the US federal government and taxpayers. But if manufacturers can evade participation in these models by striking side deals, most of those savings might not be realised.”
Additional information about the study is available here.
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