Source: Tomas J. Philipson, et al., “The Impact on Patient Health of Most-Favored-Nation Pricing of Already Marketed Drugs,” (policy brief, The University of Chicago, September 27, 2025
Commentary: The Trump administration has pursued aggressive action to lower prescription drug prices in the United States; however, these policies will have significant unintended consequences on innovation and patient health. One such policy involves applying Most Favored Nation (MFN) pricing to both Medicare and Medicaid, requiring U.S. prices for drugs that have already been launched to equal the lowest prices among a group of peer countries. Though this policy may lower prices for consumers in the short run, a policy brief from the University of Chicago finds significant long-term costs. For one, these prices are estimated to reduce U.S. pharmaceutical revenues by 49 percent and global pharmaceutical revenues by 31 percent. This is equivalent to 0.8 percent of U.S. GDP. With less revenue, pharmaceutical firms will be unable to invest as much in research and development (R&D). The brief finds that R&D investment by pharmaceutical firms will decline by 48 percent in direct response to these lost revenues. Moreover, with less R&D investment, fewer drugs will be developed and approved. The authors find that, should this policy be kept in place for ten years, there will be a cumulative shortfall of 500 drug approvals and post-approvals. This decline in innovation is estimated to result in the loss of 516 million life-years, or approximately 6.6 million lives lost globally. These estimates are also conservative, as they only measure the pricing impacts on Medicare and Medicaid and do not consider the impact these policies may have on the commercial market.
