For an administration that rightly criticizes Europe for regulating itself into obsolescence, it is oddly eager to import one of Europe’s worst ideas. President Trump’s proposed Most Favored Nation (MFN) drug pricing is an extreme version of Europe’s External Reference Pricing (ERP)—a policy that has brought with it a host of problems.
ERP is currently used by at least 29 European countries. It sets drug prices using other nations as benchmarks, either using the average or lowest of their prices. The “most favored” part of MFN implies it would use the latter. In Europe the result has been small decreases in prices accompanied by delayed launches of medicines, restricted access, and less pharmaceutical innovation.
Countries that adopt these regulations may see temporary savings, but they vanish within a year or two as manufacturers adapt. Once reference pricing is implemented in a country, pharmaceutical manufacturers offer discounts, confidential rebates, and potentially limit drug supplies to low-priced countries.
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Justin Leventhal is a senior policy analyst for the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit www.TheAmericanConsumer.Org or follow us on X @ConsumerPal