The Trump administration’s Most-Favored-Nation (MFN) drug pricing policy was built on a premise Americans broadly support: Medicare should pay what other wealthy countries pay for the same medications, not two or three times more.
A new modeling study tested that premise against global pricing data for 195 patented drugs worth $87.9 billion in annual Medicare spending. The results, published in The Lancet, suggest the policy could produce real domestic savings, but the underlying financial math creates a problem that stretches well beyond US borders.
For roughly three in four medications studied, Medicare’s projected savings exceeded the drug’s entire annual revenue in the country used to set its benchmark price. That kind of gap gives drugmakers a compelling financial reason to raise prices, delay launches, or obscure pricing data across the 19 benchmark nations.
Meanwhile, a growing stack of confidential agreements between pharmaceutical companies and the White House threatens to strip away most of the projected savings before the policy fully takes effect.
How Medicare’s pricing model benchmarks against 19 wealthy nations
Medicare’s GLOBE and GUARD pricing models tie what the federal program pays for brand-name medications to prices charged in 19 reference countries. Those nations include Australia, Canada, France, Germany, Japan, South Korea, Norway, the United Kingdom, and 11 additional high-income economies, the Lancet study reported.
Under the initial rollout, a randomly selected 25% of Medicare beneficiaries would fall under the new pricing rules over a five-year demonstration period. The researchers estimated Medicare could save $5.2 billion under GLOBE, which covers drugs administered in clinical settings, and $6.4 billion under GUARD, which covers pharmacy-purchased medications.
The study found that international benchmark prices were approximately 71% below what Medicare currently pays for those same medications. South Korea, Norway, and Australia appeared most frequently as the countries setting the reference price, the research team reported. Those findings confirm a well-documented gap that the Commonwealth Fund and other policy organizations have tracked for years.
Expanding the rules to cover all 68 million Medicare beneficiaries could raise combined savings to $21 billion under GLOBE and $25.5 billion under GUARD. Those projections assume no exemptions or confidential manufacturer deals erode the outcome.
Why drugmakers face financial incentives to raise prices abroad
Among the 138 drugs with available global sales data, the potential Medicare savings from benchmarking to a single country’s lower price were roughly 3.8 times larger than that drug’s total annual sales in the reference nation. For about 73% of those medications, the projected Medicare savings would completely exceed the drug’s entire annual revenue in the benchmarked country.
That equation puts manufacturers in a difficult position, because maintaining lower prices abroad would cost them far more in lost Medicare revenue than they earn from selling in those countries. Companies could respond by developing alternative formulations, converting visible discounts into confidential rebates, or simply delaying launches in certain countries.
“Policies in the US may impact access to medicines globally. Policymakers should ensure that availability of important medicines is not delayed as a result.” — Prof. Kerstin Vokinger, ETH Zurich and University of Zurich, via The Lancet press release
Economic research in European markets already shows that international reference pricing tends to cause price convergence, with reference country prices rising rather than the adopting country capturing the full discount. MFN pricing has been described as effectively offshoring the foundations of US drug pricing to foreign institutions the United States cannot control, as Andrew Mulcahy, a senior policy researcher at the RAND Corporation, argued in Health Affairs.
Germany, Japan, and Australia already face growing pressure from both the US administration and the pharmaceutical industry to increase medication spending, Prof. Thomas Hwang of Brigham and Women’s Hospital and the study’s lead author warned. “But this is colliding with the reality that other countries have limited budget room to give,” Prof. Hwang added.
Confidential pharma deals threaten to gut Medicare’s projected savings
An initial group of 17 pharmaceutical companies struck separate, confidential agreements with the Trump administration that reportedly include exemptions from the GLOBE and GUARD pricing rules. Those companies manufacture 131 of the 195 drugs examined in the study, representing roughly 67% of the medications analyzed, the researchers reported.
If those exempt drugs were removed from the pricing models, potential savings would shrink by 71%, leaving Medicare with just $3.3 billion instead of the projected $11.6 billion. The companies with reported agreements include AbbVie, Pfizer, Johnson & Johnson, Novo Nordisk, Eli Lilly, and Merck, among others, the Lancet press release reported, citing White House announcements.
A second round of deals announced on August 31, 2026, brought the total to 26 companies with reported MFN agreements, Prof. Hwang confirmed. With those additional exemptions, the researcher estimated savings lost would climb from 71% to roughly 80%.
“The Trump administration’s Most-Favored-Nation pricing models have the potential to deliver real savings to the US federal government and taxpayers,” Prof. Hwang stated. “But if manufacturers can evade participation in these models by striking side deals, most of those savings might not be realized.”
Legal challenges and policy limitations cloud the outlook for MFN pricing
The MFN pricing models face significant legal uncertainty that could limit or derail their implementation before savings materialize for Medicare beneficiaries. The administration’s first attempt at MFN pricing during its initial term was blocked by federal courts for failing to follow the Administrative Procedure Act, as ISPOR documented.
The current approach channels MFN pricing through demonstration models managed by the Center for Medicare and Medicaid Innovation (CMMI), a strategy that bypasses full congressional authorization. Manufacturers and industry groups are widely expected to mount fresh legal challenges against the program.
“People living in the United States have long paid more for medicines than virtually anywhere else in the world,” Prof. Aaron Kesselheim of Brigham and Women’s Hospital stated. “The Most-Favored-Nation pricing models were meant to address this gap, but their scope is limited by various exemptions and will likely face legal challenges.”
Key findings from the Lancet MFN pricing study
- Medicare could save $5.2 billion under GLOBE and $6.4 billion under GUARD during the initial 25% rollout phase, the researchers estimated.
- Full expansion to all beneficiaries could generate up to $46.5 billion in combined annual savings, the study projected.
- International benchmark prices were approximately 71% lower than current Medicare prices for the same drugs, the analysis found.
- For 73% of medications studied, projected Medicare savings exceeded the drug’s total annual revenue in the reference country, the study reported.
- Confidential deals with 26 pharmaceutical companies could erase roughly 80% of the policy’s projected savings, Prof. Hwang estimated.
- South Korea, Norway, and Australia were the most frequent countries used to set Medicare’s benchmark price, the researchers reported.
What Medicare’s global drug pricing shift means for patients worldwide
The Lancet study raises a fundamental tension at the center of international drug pricing policy that patients in 19 countries should watch closely. If Medicare successfully anchors US drug prices to foreign benchmarks, manufacturers will face a straightforward incentive to raise those foreign prices or limit drug availability in reference markets, the study’s modeling showed.
For the roughly 68 million Americans covered by Medicare, the policy’s ultimate impact depends on whether confidential manufacturer deals continue to erode projected savings at the current pace. For patients in Australia, South Korea, Germany, Japan, and the other 15 reference nations, the risk is higher prescription drug prices driven by a pricing decision made in Washington, Prof. Hwang’s research indicated.
James Robinson, the Leonard D. Schaeffer Professor of Health Economics at the University of California, Berkeley, captured the policy’s core dilemma when he described MFN pricing as “the wrong answer to the right question” in a Health Affairs Forefront commentary earlier in 2026. In a separate Health Affairs analysis, Robinson later acknowledged the approach is “an idea whose time has come.” Whether the execution matches the ambition will shape drug affordability on both sides of the Atlantic for years to come.
