In recent months, federal policymakers have renewed calls for “Most-Favored-Nation” (MFN) drug pricing, which would tie the price of medicines in the United States to the lowest prices paid in similarly wealthy foreign countries. The policy is well-meaning and directed at a real problem: foreign countries free-ride off of American-supported innovation by implementing policies that allow them to purchase innovative technologies, such as medicines, at rates that are inadequate to cover the high costs of research and development. But while this problem is very real, MFN pricing itself is severely misguided.
By tying U.S. prices to artificially low foreign ones, MFN pricing would undermine the very IP protections that make American innovation possible. It would not force foreign countries to pay their fair share for innovation, but it would prevent U.S. inventors from spearheading new breakthroughs that promote American leadership and benefit consumers.
Here’s a closer look at three central myths underlying MFN — and the reality behind them:
| Claim: Prices paid in other countries more accurately represent what’s “fair.” |
| In reality: Foreign governments achieve artificially low prices through policies that deliberately sidestep or undercut intellectual property protections, such as international reference pricing and biased cost-effectiveness metrics. They coerce inventors to lower prices with the implicit threat of tactics such as compulsory licensing, which allows a government to override patent exclusivity and authorize a competitor to produce a product without the inventor’s consent. Some countries, including in Europe, also delay reimbursement decisions for new medicines, which effectively shortens the patent life of those products and weakens the incentive for investors to fund risky research and development. Taken together, these practices weaken incentives for innovation and deny companies fair compensation for their inventions: according to the Information Technology and Innovation Foundation, price controls in OECD countries, not including the United States, reduced manufacturer revenues by up to 77% in 2018. Put simply, far from being fair market rates, prices in foreign countries are often forcibly set by governments at rates too low to sustain innovation. |
| Claim: MFN pricing would incentivize other countries to pay more, ensuring companies can continue innovating. |
| In reality: MFN pricing implicitly endorses the status quo in countries that currently free-ride on U.S.-supported innovation. It would not put any pressure on foreign countries to raise prices or abandon anti-patent policies. Yet at the same time, MFN would have direct, disastrous effects on the United States. By importing foreign countries’ price suppression tactics here, MFN would slash the revenues that innovators rely on to sustain their businesses and undermine the patent protections that allow investors to earn a return on high-risk R&D investments. In doing so, it would dramatically stifle the development of new treatments, harming Americans’ access to effective medicines. But the harm wouldn’t stop at life sciences. Because MFN would be a breach of patent protections unprecedented in U.S. history, it would erode investors’ confidence in IP in other industries, such as advanced manufacturing, clean energy, quantum technologies, and artificial intelligence, too. In short, instead of compelling other countries to fix their broken pricing systems, MFN would adopt those standards as America’s — weakening our IP system and steering our innovative sectors in a downward spiral. |
| Claim: MFN would benefit Americans and enhance U.S. competitiveness. |
| In reality: MFN directly conflicts with the administration’s efforts to revitalize American competitiveness. It would hinder the development of new technologies, innovative consumer products, and hurt companies that support millions of American jobs. According to recent research, between 2019 and 2023, China has surpassed the United States in 57 of 64 strategically important technology sectors, including advanced materials, energy, and artificial intelligence. Undermining patent rights, a core economic incentive for innovation, would be a massive self-inflicted blow to U.S. competitiveness at a critical moment. MFN would also have harmful consequences for American workers and consumers. Not only would companies be deprived of the IP protections they need to invest in developing and producing new consumer products, but shrinking revenues due to MFN price controls would also threaten domestic jobs in innovative sectors. According to 2019 reports, intellectual property-intensive industries currently support over 60 million U.S. jobs and account for more than 40% of domestic economic activity. If MFN pricing is implemented, it will reduce economic opportunity for numerous hard-working Americans. To boost competitiveness, American leaders must strengthen the patent system — not import anti-IP policies that have stifled innovation abroad. |
To see additional explanation of these issues, please see the C4IP comment letter submitted in response to the United States Trade Representative’s recent request for input on this topic. You can access that submission here.