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Most Favored Nations

July 10, 2019 | Comments Off on Most Favored Nations
Posted by Frank Ciesla

Based upon reporting, it appears that the Trump Administration will be issuing an Executive Order adopting the concept of “Most Favored Nations” as it applies to pharmaceuticals. See my prior blogs:

It appears also that there are arguments now being made opposing this concept. The objections focus on reduced profits for the pharmaceutical companies, reduced revenue to provide for Research and Development, and the potential for significant price rises in other countries.

Obviously, continuation of the same level of revenue, in circumstances where the United States would be paying no more than the lowest price charged for a pharmaceutical anywhere else in the world would require the pharmaceutical companies to raise their prices in many other markets. That effectively would allow them to avoid having to decrease prices in the United States, since the disparity in pricing between the United States and other countries would no longer exist as the result of an increase in prices charged in other countries. .Without raising prices charged outside of the United States, pharmaceutical companies will not have the same revenue flow that permits them to experience both the profit level and ability to conduct very expensive research and development which they have historically enjoyed.

The most likely outcome is a combination of all three, that is, that the price in other parts of the world will be raised, the revenue flow that provides for R&D will be reduced, and the profitability of the pharmaceutical companies will decrease.

However, it has reached the point where the American consumer should no longer bear a disproportionate burden of providing a revenue flow for research and development that is enjoyed by the rest of the world.

Further, it will be interesting to see how the cost of the American health care system will compare with those of other systems, if consumers in other countries begin paying higher prices for pharmaceuticals.


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