The U.S. government is testing a policy that could change how drugs are priced, developed, and which diseases receive research attention. Called most-favored-nation (MFN) pricing, it limits what Medicare pays for certain drugs to the lowest price charged in wealthy countries like Germany, the U.K., Japan, France, and Canada. The aim is to prevent the U.S. from paying significantly more than other nations for the same medication.
This policy is already altering how pharmaceutical companies operate, with effects extending beyond American pharmacies.
How MFN pricing works and why it sparks debate
Under MFN rules, the government selects comparable countries and monitors their drug prices. Medicare’s reimbursement rate is then set at the lowest price among that group. Manufacturers must accept this rate to sell to Medicare or risk losing access to the market, given its size.
Pharmaceutical companies have argued that higher U.S. prices fund global research and development. If those prices fall, they warn, innovation may slow. The policy is popular politically but strongly opposed by drugmakers, who claim it will force changes that could reduce patient options.
Less discussed are the ways those changes are already taking place.
Clinical trials are changing, and some drugs are being abandoned
Companies are adjusting their research focus due to pricing pressure. A study found that after the Inflation Reduction Act passed in 2022, monthly small-molecule drug trial starts dropped by 25% for preapproval studies and nearly 30% for post-approval trials. Biologics, which have a longer timeline before price negotiations begin, saw no significant decline.
MFN pricing seems to be speeding up a similar shift. Investment is moving toward rare diseases and cancer treatments, where price comparisons are less likely to lower U.S. reimbursement rates. Treatments for rare conditions are expected to make up 20% of prescription drug sales by 2026, growing at twice the rate of other drugs. Meanwhile, research into chronic conditions like heart disease and obesity is slowing, partly because these areas face stricter price benchmarking.
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Drugmakers are also altering clinical trial designs. Instead of comparing new drugs to placebos, more studies now test against existing treatments to prove better effectiveness. This helps justify higher U.S. prices by showing added value, making it harder for payers to compare them to cheaper options.
The change affects not just which drugs are developed but where they are tested.
The policy was intended to make drugs more affordable for Americans. The industry’s response has been quick and not always in line with that goal. When U.S. prices fall, companies do not simply accept lower profits. They redirect investment toward areas with less pricing pressure, such as rare diseases and breakthrough therapies. They prioritize novel treatments over incremental improvements, even if those improvements could benefit more patients. A recent Deloitte analysis found that assets with a novel mechanism of action rose sharply to 53% of total programs in 2025, up from 35% in 2024.
These are logical responses to a system that now emphasizes cost control over flexibility. The difficult part is determining who bears the cost of these adjustments. If research moves away from common chronic conditions, patients with diabetes or heart disease may see fewer new treatments over time. If clinical trials avoid certain countries, those markets could lag in medical innovation.
MFN pricing may lower drug costs in the short term. The long-term effects—measured in deprioritized diseases, abandoned research, and neglected markets—will take years to become clear. The debate over drug pricing continues, but the industry has already adapted.
A separate concern is how these shifts affect mental health recovery for marginalized groups.
Support therapy can play a role in addressing gaps created by reduced research in chronic conditions.
