October 15, 2020

Most-Favored-Nation Price Cap

How it could work

The Executive Order on Lowering Drug Prices by Putting America First proposes to lower drug costs by setting Medicare Part B and Part D prescription drugs and biological products to the price of the most favored nation. The executive order defines the most favored nation price as “the lowest price, after adjusting for volume and differences in national gross domestic product” of the product that is sold to an OECD country that has a comparable per-capita GDP.

In Medicare Part B, this policy gives the HHS Secretary the ability to implement the rulemaking plan to test the payment model which Medicare would pay no more than the most favored nation price. Medicare Part D would be eligible for the same rulemaking plan. The models would test the clinical outcomes and increased spending associated with high drug costs for the patients paying the most favored nation price.

This order also revokes the July 24, 2020 version of the executive order.  

What experts think

The expert panel agreed that this policy will reduce drug spending, but were split on if it would be a minimal or moderate reduction. The majority of the experts believed that the executive order will moderately decrease both list and net prices. While most patient groups will not see a change in drug access, most of the panel felt Medicare patients and large patient groups may see a moderate increase in their access.

The experts were divided on how significant this policy is in the evolution of drug spending policy; six experts felt that the most favored nation order significantly advances drug spending policy, but three felt it only moderately advances drug spending policy. Most of the experts felt the executive order’s ability to be implemented is a weakness of the policy, but that its precedent-setting value is a strength. Over half of the panel stated that the size of the affected population is a strength, but the other four experts were split on if that is a weakness or if it remains unknown.  

How likely would this policy be to reduce drug spending?
Would Increase Drug Spending
Would Not Affect Drug Spending
Would Minimally Reduce Drug Spending
Would Moderately Reduce Drug Spending
Would Significantly Reduce Drug Spending
Would Substantially Reduce Drug Spending
How likely would this policy be to reduce drug prices?
Would Significantly Increase Drug Prices
Would Moderately Increase Drug Prices
Would Not Affect Drug Prices
Would Moderately Decrease Drug Prices
Would Significantly Decrease Drug Prices
List Prices
Net Prices
How likely would this policy be to increase patient drug access?
Would Significantly Reduce Drug Access
Would Moderately Reduce Drug Access
Would Not Affect Drug Access
Would Moderately Increase Drug Access
Would Significantly Increase Drug Access
Rare Disease
Large Patient Groups
How significant is this policy in the evolution of US drug spending policy?
Does Not Advance Drug Spending Policy
Minimally Advances Drug Spending Policy
Moderately Advances Drug Spending Policy
Significantly Advances Drug Spending Policy
Ground-Breaking Shift in Drug Spending Policy
What are the strengths and weaknesses of this policy?
Size of Affected Population
Evidence Base in Support of Policy
Precedent-Setting Value
Magnitude of Drug Spending Impact
How important are the following in your analysis of the policy's impact?
Not Important
A Little Important
Somewhat Important
Very Important
Unclear how other countries will respond
Unclear how domestic manufacturers will respond
Implementation of Part D provisions, as it would need Congressional action
Unclear how rebates in other countries would be factored into price setting
Unclear which drugs will be impacted
Unclear how prices will be set within Part D given interaction with private plans
"Most favored nation" does not specify if the nation will change over time or between drugs

Considerations for policymakers

Experts highlighted many considerations for policymakers. The most important of which are that it remains unclear how other countries or domestic manufacturers will respond to this policy change. Other key considerations include the congressional action that would be necessary to implement the Part D provisions and that it remains unclear how rebates in other countries would be factored into price setting. Additional considerations include the uncertainty surrounding which drugs will be impacted, how prices will be set within Part D given the interaction with private plans, and if the "most favored nation" will change over time or between drugs.