The Trump administration's initiative to lower drug prices within the US Medicare program by aligning them with those in other affluent nations could inadvertently incentivize pharmaceutical companies to raise prices and restrict access to their products internationally, according to a recent study. Researchers discovered that for approximately three-quarters of the drugs examined, manufacturers would incur greater revenue losses in the US by charging Medicare lower prices than their total sales from the same drug in the cheaper reference country used for benchmarking.
The policy, known as Most-Favored-Nation pricing, aims for Medicare drug prices to match the lowest international list prices in a basket of 19 reference countries. While intended to cut US spending, the study highlighted that the estimated reductions in Medicare spending for many drugs would significantly exceed the annual sales of those drugs in the binding reference country. This creates a strong financial incentive for drugmakers to adjust their pricing and launch strategies outside the US.
Experts suggest that this could lead to higher drug prices and delays in new drug launches in countries outside the US, particularly in Europe. For instance, the Lancet study projected that Medicare could save $5.2 billion (16.1%) under the GLOBE model (for hospital/clinic drugs) and $6.4 billion (17.6%) under the GUARD model (for pharmacy drugs). However, these potential savings are often substantially larger than the annual sales of the drugs in the reference countries, pushing companies to re-evaluate their global strategies.
