Reference Pricing: The Wrong Prescription for Patients

As Congress considers ways to make medicine more affordable, they should weigh the serious consequences of proposals that call for a government price control scheme known as "most favored nation" (MFN) and its negative impacts on patients and the search for breakthrough treatments and cures.

All about access: MFN pricing would be based on the lowest prices paid by a select group of foreign countries. While this may seem to make sense, it would undermine the availability of the newest medicines. The use of government price controls in other countries illustrates the impact such policies have on patient access. For example, while 87% of new medicines are available within three months in the U.S., only 63% are available in Germany and 59% in the U.K., with 10- and 11-month delays in access respectively. At worst, an MFN proposal could lead the U.S. down the path of New Zealand and Korea, where only 20% and 35% of new medicines are available, and patients suffer access delays between 28 to 30 months. 

Harmful to New Medicines: Introducing MFN pricing would impose harmful price controls that undermine U.S. investment in the next generation of breakthrough medicines. America's leadership in biopharmaceutical innovation is rooted in its system of market-based pricing and long-standing respect for intellectual property (IP) protections. The U.S.’s market system and strong IP framework have enabled the private sector to thrive by creating incentives for innovators to invest in the research and development (R&D) of new medicines in the United States. 

Yes, and: MFN pricing could undermine well-paying American jobs. Chamber data shows that IP-intensive jobs offered significantly higher wages, with an average wage premium of $18,483 above non-IP jobs. The U.S. biopharmaceutical industry directly employs more than 1 million individuals, with an additional 3.8 million jobs indirectly supported by industry and worker spending. This sector contributes $1.65 trillion in output, representing 3.6% of all American economic output. Implementing MFN pricing could jeopardize hundreds of thousands of these good jobs and initiate a chilling effect on hiring new workers. 

A bad “solution”: The U.S. must reject policies that utilize foreign price controls to maintain its leadership in medical innovation. Simply put, implementation of a MFN pricing model would disrupt patient access, prevent the development of the next generation of medicines, and harm the ability to create well-paying jobs.  

Call to action: We urge policymakers to reject any form of MFN pricing and instead focus on preserving American’s ability to have access to new medicines. The Chamber looks forward to working with policymakers to ensure American patients benefit from cutting-edge of medical innovation.

About the author

Tom Quaadman

Thomas Quaadman is former executive vice president of the U.S. Chamber Center for Capital Markets Competitiveness (CCMC), the Chamber Technology Engagement Center (C_TEC), and the Global Innovation Policy Center (GIPC).