How the U.S. MFN Policy Could Reshape Global Drug Prices

PM Narendra Modi, 22 Aug 2024 - India's pharmaceutical exports extend to both developed and developing countries and with enhanced research and development efforts, the industry is poised to usher in a new era of drug manufacturing and testing. Collaboration between public and private research institutions and increased funding and government support are essential for driving further growth and innovation. Further, initiatives such as the Production Linked Incentive Schemes and the Bulk Drug Park, in alignment with the "Make in India" campaign, foster an environment conducive to investment, innovation, and business development in the pharmaceutical sector.

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The U.S. President in 2025, who announced a sweeping "Most Favored Nation" (MFN) pricing order on prescription drugs. On May 12, 2025, President Donald Trump used his executive powers to order U.S. drug prices slashed by "30% to 80%", tying U.S. prices to the lowest levels paid by other developed countries. In a Truth Social post, he vowed that under the new MFN policy "the United States will pay the same price as the Nation that pays the lowest price anywhere in the World".

The announcement set off a global shock: pharmaceutical stocks fell sharply in Europe, Asia and the U.S. as investors braced for profit hits. Analysts warned that while American patients would see near-term relief, companies would "intensify pressure on low-cost markets like India to raise their prices," since U.S. prices would be benchmarked to the cheapest international price.

Decades of U.S. Drug Pricing Reforms Pressure to rein in U.S. drug costs has a long history. The 2003 Medicare Modernization Act created Part D drug coverage but explicitly barred the federal government from negotiating prices on behalf of seniors. Subsequent efforts failed: the 2010 Affordable Care Act (Obamacare) included no new price controls on branded drugs, and in exchange Big Pharma helped finance coverage expansions. Even on the campaign trail both Donald Trump and Hillary Clinton (2016) pledged to allow Medicare to negotiate, but Congress repeatedly nixed such measures. In the 2018-22 period, Democrats finally enacted negotiation via the Inflation Reduction Act - Medicare must begin price negotiations for a handful of high-cost drugs in 2026.