Alliance Stands Firmly Against ‘Most Favored Nation’-type Price Controls in Upcoming Reconciliation Bill

Alliance for Aging Research President and CEO Sue Peschin, MHS, issued the following statement in response to recent efforts to apply “most favored nation”-type (MFN) drug price controls to Medicaid or other federal health programs in reconciliation: 

In its latest attempt to pay for a massive tax cut package, the White House is floating a ‘most favored nation’ (MFN) policy for prescription drugs in the Medicaid program, and a bipartisan pair of Senators are proposing a potentially broader application of international reference pricing in legislation. The Alliance for Aging Research stands firmly against any pressure to include MFN-type price controls in the upcoming reconciliation bill.  

Put simply, the MFN policy on drug prices is a scam for America’s beneficiaries. The most favored nation policy relies on international price competition and promises to provide Americans with “the same low prices” for prescription medications available in other countries. However, it is founded on incorrect assumptions about where high out-of-pocket costs really come from, and what it would mean for the U.S. to adopt cost-effectiveness standards used by foreign governments. 

The MFN idea is primarily designed to save government health programs money (or, in this case, pay for tax cuts), and it relies on limiting beneficiary access to drugs their doctors prescribe. According to CMS’ own data, its November 2020 MFN proposed rule relied on a 9 to 19 percent reduction in patient utilization. The same proposal mentioned that many of the medications included did not have comparable alternatives, so the rule would have left patients without any treatment.   

Just as worrisome, international reference pricing policies effectively endorse the use of discriminatory cost-effectiveness standards often used by other governments. Many countries likely to be referenced, such as the United Kingdom and Canada, make drug reimbursement and coverage decisions based on cost-effectiveness assessments that are measured by the quality-adjusted life-year (QALY). These assessments assign a financial value to the patients for whom a given treatment is intended. The Affordable Care Act banned the use of QALYs for coverage and reimbursement decision-making in the Medicare program. 

QALYs originated in the 1960s and have been used by the British government to ration health care for its National Health Service. If we embrace an MFN-type reference pricing policy, it means embracing health care rationing as well. This type of rationing in many European countries has not only resulted in access issues but has also translated into higher mortality rates for chronic diseases, such as cancer. 

Ultimately, the fact that drugs are inaccessible and unaffordable to many is due to many factors. The White House and members of Congress should coalesce on meaningful drug pricing policies that will produce federal savings for the government — such as PBM and 340B reform. 

The policy behind the MFN idea is impressively bipartisan for its shortsightedness. Americans pay their whole lives for what they think is insurance. They expect — and deserve — better than these scams from both parties to fix it.