Most Favored Nation Policy Is Unfavorable to U.S. Biopharmaceutical Research | Citizens Against Government Waste

Most Favored Nation Policy Is Unfavorable to U.S. Biopharmaceutical Research

The WasteWatcher

Back in September, President Trump signed an Executive Order ordering the Department of Health and Human Services to implement a most favored nation (MFN) policy for pharmaceutical reimbursement in Medicare.  What this means is the U.S. would pay no more than the lowest price found in 14 countries, including Canada, England, Greece, Italy, and Japan.  While that may sound like a good proposal to help reduce drug costs, it is not.  These countries use the heavy hand of government to manage their healthcare and that includes price controls.

A new analysis was released in November 2020 by NDP Analytics titled, “Will U.S. Leadership in Biopharmaceutical R&D Continue?”  The authors, Nam D. Pham, Ph.D. and Mary Donovan, write “The positive and negative impacts that public policies can have on biopharmaceutical innovation can be seen in the movement in the balance of R&D investment from Europe to the U.S. in the late 1990s, and perhaps again with the rise of Asia as a biopharmaceutical innovation center very recently.  Price controls and other interventions in the European medicines market decades ago – and the adoption in the U.S. of more marketfriendly drug policies – corresponded with the shift to the U.S. as the world leader in biopharmaceutical R&D.”

In 1990, $16.7 billion was invested biopharmaceutical research, with European countries contributing 59.2 percent and the U.S. contributing 40.8 percent of those investments.  But because Europe adopted strict price controls during the 1980s and 1990s, that investment began to shift.  By 2017, of the $95.7 billion invested in biopharmaceutical research, the U.S. contributed 58.3 percent and Europe contributed 41.7 percent.

Pham and Donavan discussed how this shift caught the attention of European policy makers and wrote, “In its 2006 competitiveness report, the European Commission (EC) noted, ‘Since 2000, the U.S. has consolidated its central role as a locus of innovation in pharmaceuticals.’  Further, the EC observed, ‘Europe is lagging behind the U.S. in its ability to generate, organise, and sustain innovation processes and productivity growth in pharmaceuticals.  Moreover, a disproportionate share of pharmaceutical R&D is performed in the U.S., with negative consequences [for Europe] in terms of both high value-added employment and complementary investments in clinical research.’ Günter Verheugen, Vice-President of the European Commission for Enterprise and Industry, stated ‘[W]e are confronted with a move of research and production of innovative drugs outside Europe.’”

Unfortunately, it appears President Trump is determined to adopt these failed policies for our country.  It is expected that an interim rule could be released today that would implement an MFN policy that would adopt European price controls for Medicare.  Meanwhile, some Asian countries are adopting policies that encourage innovation.  The report’s authors write, “Over the last decade, various Asian nations have been advancing policy reforms to grow that region’s biopharmaceutical sector, including seeking to implement more science-based regulatory systems for the review and approval of new medicines, pricing and access reforms, and other policies to incent increases in biopharmaceutical R&D investments.  For example, in 2017, China updated its National Reimbursement Drug List (NRDL) for the first time since 2009 to include additional new innovative medicines and is seeking to establish an innovative biopharmaceutical industry as a key development goal.”

The MFN policy should be rejected.  It would be sad if one of President Trump’s legacies would be China overtaking the U.S. in biopharmaceutical research.