BEST OF: What Most Favored Nation Drug Pricing Would Mean for the US
A Health Podyssey is on vacation in July. We will return with new episodes in August 2026.
This episode originally aired on April 14, 2026.
Health Affairs' Rob Lott interviews James Robinson of the University of California Berkeley about his recent paper exploring most favored nation drug pricing, weighing its feasibility, likely effects on drug launch prices, and implications for global pharmaceutical innovation and investment.
Order the April 2026 issue of Health Affairs.
Rob Lott: Compared to other nations, The US finances a
disproportionate share of global pharmaceutical research and
development. This comes out of the higher prices we pay
compared to anywhere else. And lately, President Trump and
others have announced that they're willing to do whatever
it takes to close that gap. The most direct proposal to that end
is a policy typically referred to as most favored nation drug
pricing, in which we set a price ceiling for drugs based on the
lowest prices paid among other developed nations. Everyone's
talking about it and promising a lot, but the questions remain.
Is it realistic, and would it achieve what we hope it will?
That's our question for today's Health Podyssey. I'm here with
Doctor. James Robinson, the Leonard D. Schafer Professor of
Health Economics at UC Berkeley, Director of the Berkeley Center
for Health Technology, and a contributing editor at Health
Affairs.
He has a new commentary in the April issue of Health Affairs
titled Most Favored Nation Drug Pricing is an Idea Whose Time
Has Come. And in it, he aspires to, quote, take the president
seriously, if not literally. I cannot wait to dig into this
paper, into that promise, and, into Jamie's view of the road
ahead for most favored nation drug pricing. Jamie, welcome to
A Health Podyssey.
James Robinson: Glad to be here and glad you and I in the next
twenty minutes are going to solve this issue. It's going to
be great.
Rob Lott: All right, let's get to it then. I think there are
sort of two turbulent but distinct policy streams sort of
encircling us right now. One is this formal proposal for
Congress to enact a uniform, most favored nation drug pricing
policy, in which, as I said a moment ago, we sort of set a
ceiling, for drugs based on the prices that they pay in other
developed nations. Congress hasn't acted on this, but the
administration has called for it to do so. At the same time,
there's this other stream that we're kind of feeling, and it's
this series of deals that the administration is striking, the
result of which is drug companies essentially
volunteering our listeners can see my air quotes there to lower
their prices on certain drugs.
And in terms of the sort of potential for long term reform
or impact, what is your sense of the consequences of these sort
of two efforts taking place at the same time? Do they work in
tandem or are they working at cross purposes?
James Robinson: I always separate in my mind the formal
structure of a most favored nation or international
reference pricing as a legal construct, which I would say has
very little chance of really going very far. Congress is not
going forward the legal obstacles are huge and so people
that sort of are complacent about this point to that but the
other one is what I will call this relentless inexorable all
means available assault on drug prices by the president and his
supporters and I think that that is going to go forward and I
think that it's going to outlive president Trump it's very hard
to imagine some democratic president elected three years
from now saying oh yeah, yeah, no I like paying three times
what Germany pays for drugs. We're not doing that Trump thing
anymore. So I use the word drug price compression as kind of a
more generic thing and I do think that drug price
compression it's already happening and it is going to
it's going to get stronger and stronger particularly the prices
of newly launched drugs and so I think that's what we will want
to talk a little bit about not so much drugs that are on the
market today but drugs that are on the market tomorrow, next
year, and three years from now.
Rob Lott: Okay so part of the reason prices are higher in The
U. S. Compared to other nations is that other nations use health
technology assessment methods. Basically, they apply analysis
to assess its potential value, potential effect on patient
outcomes compared to other drugs in the market, and they use that
as part of their negotiations around the prices of drugs. Now
repeatedly in The US, lawmakers have resisted implementing
something like that here, presumably due to pressure from
the pharmaceutical companies and patient groups opposed to that
approach.
And yet, here we are sort of importing that tool, that health
technology assessment from other nations. And I'm curious for
those people who have long advocated for something like
health technology assessment in The US, should should they
consider this a win?
James Robinson: Personally, I separate the issue of doing HTA
on the one hand from paying lower prices on the other hand.
HTA basically allows you to do a comparative clinical analysis
drug A is better or worse than drug B in various dimensions and
that can be very complex. Again, all the scientists it's full
employment for scientists and health economists and stuff like
that's great but that doesn't say why does Germany pay more
than France? Why does France pay more than Italy? You know
they're all doing HTA.
At the end of the day the ability of any payer be it a
government or insurer or whatever to get a discount is
based on the ability the credible threat by that payer of
walking away from the table if they don't get a discount and
the Europeans and Australians and Canadians have had a more
they've been more willing to do it and they've been helped in
that by the fact that the drug companies and they everybody
knew that America would pay for it in the end. This is how drug
prices are set in America by the way. What's the level of price?
You want to know how it's done? By a global drug company they
have their people in all the major markets in the world.
They send those people out there they fight for the highest price
they can get in Portugal, in Spain, in Indonesia they report
back to the headquarters this is as good as I can do they
multiply those prices by volumes and they say okay well that's
what we're getting from the rest of the world the last one is
going to be The US Of A so they add up what they're going to get
then they say how much do we need to get from The US Of A in
order to hit our earnings targets that we've promised to
Wall Street for next year? That's where it comes from
they've got to hit those Wall Street targets because they've
got to keep the capital flowing to keep the R and D flowing and
etc. So you know the drug company the person that they've
got negotiating in Italy can you know they do their best but, you
know, they know that America's going to pay it in the end and
now they don't. This is radical. This is very radical and the
question is, do you believe Donald Trump?
Rob Lott: Okay. Let me That's ask
James Robinson: a good question.
Rob Lott: Let me ask you. Yeah. Do you believe Donald Trump? And
I guess the sort of corollary to that would be sort of do the
drug companies?
James Robinson: I think the drug companies believe Donald Trump.
I think that they think that he really will put import tariffs
on them, that he really will call for the resignation of the
CEO, that he will he'll do this he'll do that he'll give them a
priority voucher oh no he won't give them a priority voucher he
will let their drug go through the FDA oh no he won't let their
drug go through the FDA and it's going to go on and on and on so
they are desperate to comply with the principles of most
favored nation while in fact doing as little as possible okay
of course they want to do as little as possible and the
skeptics say oh look what they're doing they've agreed to
it for Medicaid and Medicaid price already are at MFN levels
more or less so that's smokescreen and they've promised
to invest in manufacturing facilities in North Carolina oh
they were probably going to do that anyway all right but then
the real kicker this is the kicker is that they have pledged
to set the same price in The US and the rest of the world for
new drugs coming online next year.
That is an auditable thing and that is think it's going to
happen. By the way, first of all drug companies favor that. Drug
companies like to have similar prices worldwide they just want
other countries to pay more. Okay the people that don't
really don't like this are the payers so I think that the we're
already seeing it they're beginning to launch drugs at
prices they're saying that it's going be the same in different
countries they're trying to wiggle, but the thing to watch
is going to be some of them they're already saying the drug
companies are saying we're not going to launch our drugs in
countries where we cannot get a decent price because then the
America is going to want that discounted price and we'd rather
not sell our thing in that medium sized little country over
there than endanger the biggest market in the world. Remember
The United States Of America accounts for 40% of global
pharmaceutical industry revenue 80% of global pharmaceutical
revenue profit.
Do not mess with The US market pharma CEO if you still want to
be in your job next week.
Rob Lott: Is there a scenario where drug companies choose not
to sell their drug in Portugal or Spain or anywhere else?
James Robinson: They're already trying to do it, they're already
doing it now. Course the Europeans are pushing back and
they're saying that you drug company need to launch in any
country in the EU that wants you to launch there otherwise we're
going to do bad things to you like remove your patent
protection but they don't say we promise to pay a price high
enough that you want to do that so it's kind of like no you have
to launch, you have no bargaining leverage now with us
because you have to launch, so it is the unstoppable force
meeting the immovable object.
Rob Lott: Okay, well, we'll have to see how that unfolds in the
coming months and years ahead. If we can sort of take one step
back to sort of the argument against most favored nation,
really the argument against any sort of policy that puts a
downward price pressure on drugs is that it's going to limit
potential profit in a way that undermines our innovation
ecosystem. And I'm wondering when you hear that, is that sort
of the perfect argument? You really can't rebut that? Or is
there an alternative to basically any kind of reduced
price undermining innovation?
Are those two goals mutually exclusive, or is there a way
forward?
James Robinson: Well, I know that the majority of investment
in pharmaceutical is funded by private firms using profits
based on prices so that they're not making this up and if there
was only one country in the world then this argument would
be rock solid but the issue is not how much should we the world
pay for drugs it's how much should we United States Of
America pay for drugs oh wait a minute those are different
things those are different things and so it's a very
interesting discussion as to whether the world is paying
enough for drugs whether we should pay more to get more
innovation etc. And we can have that discussion I'm happy to do
that I'm a believer in pharmaceutical investment I
think that probably there's some efficiencies to be gained in
that process we can talk about that some other time but the
real the question of the day is not how should the world pay
more it's should The US pay more and let's translate that should
bus drivers nurses and school teachers in America who pay
taxes and insurance premiums in America pay twice as much as bus
drivers nurses and school teachers in other developed
countries?
That's actually what's being discussed here. I'll give two
answers to that question. My first answer is, Hell no! My
second answer is Well yes if those school teachers in America
get something for their extra money. What is it?
Well it would have to be some version of America pays more so
America gets more than Germany, France. More
Rob Lott: advanced science, better drugs,
James Robinson: Invest that kind of in the local ecosystem,
faster access, more jobs, more manufacturing facilities, you
know this that and the other thing and I'm in favor of that.
If I was the president which I'm not, which I'm not unfortunately
unfortunately I'm not but if I were the president I would say
America should pay lower drug prices but also at the same time
should invest more in the National Institutes of Health
more in ARPA H, more in manufacturing institutes, more
in STEM everything and sort of keep the overall and all that
stuff can be somewhat predicated on we'll give you the money if
you do it in America. Unfortunately, current president
is doing the opposite. He's saying we want to pay lower
prices and do less in terms of the other public investments, So
I think that is very unfortunate and will have adverse effects on
the rate of investment and over time in the rate of new drug
innovation.
Rob Lott: Fair enough. I want to ask you a few more questions
about the the road ahead, but first, let's take a quick break.
And we're back. I'm here with doctor James Robinson talking
about most favored nation drug pricing policy. And in addition
to your paper in the April issue of Health Affairs, we also have
a pair of perspectives that sort of reflect on your commentary,
react, and respond to it.
And in one of those, Andrew Mulcahy of RAND asks the
question, to what end? And he continues, quote, the challenge
is for The US to establish the point at which most favored
nation drug pricing policies will have succeeded. That is,
when the resulting net prices paid for brand name drugs are
right, quote right, from a US focused value oriented
perspective. And that sort of echoes to me this sort of
question you're asking about sort of, if we do pay, what do
we get for it? And sort of what's the right equilibrium
there?
So I'm curious how you respond to that and what you think we
should be doing to sort of meet the challenge that Andrew
Mulcahy has laid out.
James Robinson: I'm not sure I fully understand it. I mean it
sounds like it's partly how much should the world invest in new
drugs, what will it get for its investment compared to investing
in other things and that is a very good question. My shorter
answer on that would be more, okay, exactly how much more
that's a different question but I think that in terms of the
present context it's kind of I would make the analogy me and
President Trump would make the analogy I want to say between
most favored nation drug pricing and U. S. Support for NATO and
the war in Ukraine.
You see Trump would say, well I don't know what Trump would say,
but some people would say NATO is a good thing, defending
Ukraine is a good thing, but why is America paying most of it?
Why is America paying more to defend Europe than Europe is
paying to defend Europe? So we've got this thing that
they've said, you know, we pay 5% of GDP in the military and
they pay 2%, 2.5% and no, no, no, everybody should pay it was
3% now they're talking 5% they're not doing it, don't
worry and I don't know whether 3% is the right number I don't
know whether 2% or 5% is the right number but I do kind of
know that we shouldn't be paying more to defend Germany than
Germany is paying to defend Germany on a per capita basis.
Have such wonderful welfare states cradle to grave and how
can they afford that? Well, guess what?
They're paying low drug prices and they're not paying to
support NATO. So I'm like, you know, I don't want to read one
more Commonwealth Fund story about how we've got the worst
health care system in the world because we don't have cradle to
grade health care like Germany does when we're paying for the
German drugs and we're paying for the German defense. By the
way, I love Germany. I speak German. I'm in there frequently,
so I'm not bashing Germany.
Okay? But I'm just saying, okay, Germans, step to the plate,
please.
Rob Lott: Well, brings me back to this question of, you know,
should the bus driver be paying more for their drugs than a
German bus driver? And you might answer that question, in The
United States, hell no, and yet we we're still sort of the,
supporting a system and politicians and elected leaders
who aren't doing anything about it. You could say President
Trump is doing something about it. Maybe we'll see. But I'm
curious, do we have a sense of sort of the politics in Europe
and other developed countries about how they might respond to
perhaps their country having to pay more for those drugs and if
we might see it translating from a sort of philosophical
discussion to the practice of how the countries are governed.
James Robinson: I think that the short answer is that Europeans
don't have extra money to throw at drugs on the other hand
pharmaceutical industry is very important to a number of
European countries and they don't want to lose that industry
and they are seeing it slip away they are they really are seeing
it slip away to The United States and then to China so
there is a great sense of panic around this topic they don't
have an easy solution but I'm in Europe frequently and the
dialogue has really changed. Up until a few years ago there was
only one when you said the word pharmaceutical that everybody
said this we're spending too much on this stuff. Now you say
the word pharmaceutical they say that but they also say uh-oh
we're losing all these firms and all of our bright young people
are moving to the Silicon Valley and blah blah blah. So the first
step is the awareness and the worry and that is at an all time
high. They do not have extra money so what I think they're
doing, which they are doing, is they are looking for okay drug
companies we will pay you a higher price or some subsidy or
something in exchange for you investing more in our country.
That could be manufacturing, it could be R and D facilities, it
could be support for our research universities but quid
pro quo we're not just gonna we're not gonna be stupid like
the Americans and just pay you more we're not stupid we're
French By the way, I'm a French citizen. French are like we're
not just giving you this we're not giving this away we're gonna
get something for this and I think that that's what they're
gonna do I think there's gonna be a lot more of price as one
dimension of a closer relationship between the
industry and the payers and the countries once we recognize that
the big story here is competition with China and that
that's actually the background to this whole thing. We could
spend another half hour on that which we won't but the Europeans
are bona fide terrified that they are going to lose their
pharmaceutical industry and what can they do about it?
Rob Lott: Well perhaps in just a final minute or two any last
minute comments on perhaps what you're going to be tracking over
the next six months, six to twelve months, what are you
going to be watching in terms of pharmaceutical company action
and administrative action as it relates to most favored nation
drug pricing?
James Robinson: I am going to be looking at how drug pricing
integrates with other dimensions of the payer manufacturer
relationship because it's just one dimension. Just like with
Trump, he's willing to trade prices against manufacturing
investments, against tariffs, you know what I mean? He's a
deal maker. He care about any one thing particularly. I think
that although he's rude and crude that that approach is
actually not the least intelligent thing to do so I
think that I hope that we will collectively pass through this
dark moment and that we will end up saying that you know what
pharma is important to America, America is important to pharma,
let's know hey let's make a deal.
Rob Lott: All right a great note to wrap up on. Jamie Robinson
thank you so much for taking the time to chat with us. Thanks so
much for joining us today.
James Robinson: Thank you.
Rob Lott: To our listeners, thanks for tuning in. If you
enjoyed this episode, leave a review, share it with a friend,
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