'Most Favored Nation' Drug Pricing Is An Idea Whose Time Has Come

The US pays higher drug prices than do peer nations, thereby financing a disproportionate share of global pharmaceutical research and development. President Donald Trump has announced himself willing to do "whatever it takes" to compress, if not eliminate, the global disparity. In response, major drug firms have hurried to announce price reductions for at least some patients and some products. "Most favored nation" drug pricing as a formal policy faces many political and administrative challenges, but the threat has been effective in driving behavior change by pharmaceutical firms and payers in other nations. This Commentary takes the president seriously, if not literally. It describes the range of instruments available to the administration to pursue its price goals and assesses the tools' potential impact on the rate of investment and innovation in pharmaceuticals. Most favored nation pricing will reduce the revenues available to the industry for research and development, but its impact may be moderated by improved prioritizing of investments and improved efficiency in translating investments into innovation.