The White House recently announced plans to implement a Most Favored Nation drug pricing model, which would tie U.S. drug prices to those in 20 countries with government-imposed price controls.
The stated intent — to lower healthcare costs for Americans — is well-meaning. However, the approach is deeply misguided.
Importing foreign price-setting policies and, by extension, healthcare rationing systems would upend the ecosystem that has made the United States the global leader in medical innovation. It would erode the market-based incentives that drive research and development, stall the pace of medical progress that ensures U.S. patients see new medicines first, and open the door for competitors like China to overtake America’s lead.
This isn’t putting patients first — it’s a self-defeating pivot with lasting consequences.
For decades, the United States has led the world in biopharmaceutical innovation — producing hundreds of treatments and cures, creating high-paying jobs, and generating $1.6 trillion in economic output. That success wasn’t accidental. It was built on a foundation of strong intellectual property protections and other pro-innovation, free-market policies that reward sustained investment in medical research.
Now, that leadership is on the line.
History offers a clear warning. Until the late 20th century, Europe led the world in biopharmaceutical R&D. In 1990, European pharmaceutical companies accounted for 49 percent of global R&D investment, compared to 33 percent for the United States. As Europe introduced aggressive price controls, limited market-based incentives, and delayed and in some cases denied patient access to new medicines, investment plummeted. By 2000, the European share of biopharmaceutical R&D declined by nearly 25 percent.
Meanwhile, the United States became the new global hub for biopharmaceutical research on the strength of policies that encouraged investment — including strong IP protections, science-based regulatory frameworks, and the absence of price controls.
Today, the United States produces nearly twice as many new medicines as Europe, and most newly approved medicines reach American patients first. Eighty-five percent of new drugs are available in the United States, compared to less than 30 percent in countries with price controls.
The MFN model threatens to reverse this progress. It will tie U.S. drug prices to the lowest prices paid in a handful of countries like Lithuania, South Korea and Slovenia — all countries with a GDP 60 percent that of the United States, and all countries that delay or deny access to new medications. In Europe, patients wait a year and a half before they can access new medicines. These countries trade access for budget containment, a tradeoff the United States cannot afford to make.
The Congressional Budget Office has cautioned that price controls would “reduce the introduction of new drugs” in the long run by cutting into the manufacturer’s revenues that fund biopharmaceutical R&D.
One Vital Transformation study found that MFN-style policies could reduce drug development by 90 percent among small biotech firms — the companies driving breakthroughs in areas such as oncology, neurology and rare diseases. A separate analysis by a former White House economist projected that price controls will lead to a $1.5 trillion drop in R&D spending and result in up to 342 fewer drug approvals by 2039.
As the United States retreats, China would be poised to surge ahead. Last year, the United States launched 48 new active substances. China followed closely behind with 35 and now ranks third for total drug launches globally. Bolstered by low labor and material costs, as well as government R&D subsidies, China is rapidly closing the innovation gap.
If U.S. firms are forced to scale back research or delay product launches under MFN pricing, China could quickly become the preferred destination for biopharmaceutical development — not just for Chinese companies but also for global investment.
That’s more than an economic setback — it’s a national security vulnerability. A weakened U.S. pharmaceutical sector risks future dependence on China for access to critical medicines. As the CEO of the Biotechnology Innovation Organization warned, MFN drug pricing “will only serve to empower China and our other adversaries.”
Fortunately, there are better ways to lower drug costs without sacrificing our innovation edge.
Rather than importing failed policies from abroad, the administration should pursue trade-based solutions that ensure foreign governments contribute their fair share to global R&D. Appointing a dedicated pharmaceutical trade negotiator within the Office of the U.S. Trade Representative to hold countries accountable for lax IP enforcement and underinvestment would be a strong first step. USTR should also work to establish a NATO-style framework that requires our high-income allies to devote a minimum share of GDP per capita to innovative medicines, ensuring that the financial burden of medical progress is shared equitably.
At home, policymakers should prioritize reforms that improve transparency around for-profit entities, such as pharmacy benefit managers, and rein in abuses of the 340B program — ensuring that savings reach the patients they’re intended to help, not corporate intermediaries.
The United States became the global leader in biopharmaceutical innovation by cultivating a system grounded in competition, scientific excellence, and the promise of reward. The MFN model threatens to unravel that foundation. We must reject short-sighted price controls that jeopardize the health of American patients, our economic strength and national security.
