The Trump administration has released further details on its “most favored nation” (MFN) drug pricing initiative, a policy designed to tie U.S. prescription drug prices to those paid in other developed countries. The move, announced initially in May, aims to lower costs by leveraging international price comparisons, but its implementation has faced scrutiny due to complexity and transparency concerns.
The Core Mechanism: Second-Lowest Pricing
The Centers for Medicare & Medicaid Services (CMS) will use a benchmark system selecting the second-lowest price among eight comparator nations: Canada, Denmark, France, Germany, Italy, Japan, Switzerland, and the United Kingdom. This approach means U.S. prices will align with the near-lowest rates available globally, rather than the absolute lowest.
The GENEROUS Model: Voluntary State Participation
A new payment model, dubbed “GENErating cost Reductions fOr U.S. Medicaid Model” (GENEROUS), will make MFN prices available to state Medicaid programs through supplemental manufacturer rebates. Participation is voluntary for both states and drugmakers, running from 2026 to 2030. States opting in will access lower prices via CMS-negotiated rebates tied to the international benchmark.
How Net Prices Are Calculated
MFN prices will be based on manufacturer-reported net prices, accounting for all rebates, discounts, and concessions. These figures will be adjusted using each country’s GDP per capita and purchasing power parity to ensure fair comparisons. The model focuses on “single source” (no generics) or “innovator multiple source” drugs from participating manufacturers.
Early Adopters and Agreements
Several companies, including AstraZeneca, Pfizer, and EMD Serono, have already agreed to participate in GENEROUS following initial deals with the Trump administration. More firms may join as the model progresses. The administration claims these agreements will align U.S. drug prices with those in other developed nations.
Improved Access and Uniformity
The GENEROUS model also seeks to improve Medicaid access by standardizing coverage and utilization management across participating states. This includes easing restrictions on prior authorization and step therapy, potentially improving patient adherence and reducing costly hospital visits.
No Impact on Patient Out-of-Pocket Costs
Unlike other elements of the administration’s approach, such as TrumpRx and Medicare expansion, GENEROUS will not change out-of-pocket expenses for Medicaid beneficiaries. These costs will remain nominal.
Remaining Challenges and Questions
Despite the details, significant hurdles remain. France has already blocked transparency of net prices, complicating CMS’s ability to obtain accurate data. Furthermore, discrepancies in drug approval timelines and availability across comparator nations pose logistical challenges.
The administration’s claim of offering the second-lowest price is also questionable in some cases. For example, the price of Ozempic through TrumpRx may be up to three times higher than prices in several comparator countries, even after accounting for net costs.
In conclusion, the Trump administration’s MFN drug pricing initiative represents a significant shift in U.S. pharmaceutical policy. While the goal is to lower costs, its success hinges on transparency, international cooperation, and consistent implementation of the complex benchmark system. The model’s voluntary nature and unresolved logistical hurdles introduce uncertainty about its long-term impact.
