Most-Favored-Nation, Executive Order 14297|Forward Looking Perspectives For Drug Manufacturers, Pharmacy Benefit Managers, Health Plans, And Pharmacies

On May 12, 2025, U.S. President Donald Trump signed an executive order (EO) titled "Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients."¹ In part, the EO revisits previous efforts during Trump's first term to implement Most-Favored-Nation (MFN) provisions surrounding the price of prescription drugs.

Quick Rewind to 2020

MFN pricing was first proposed by Trump in July 2020 through EO 13947,² "Lowering Drug Prices by Putting America First."The EO directed the Secretary of Health and Human Services (HHS secretary) to "take appropriate steps to implement his rulemaking plan to test a payment model pursuant to which Medicare would pay, for certain high-cost prescription drugs and biological products covered by Medicare Part B, no more than the most-favored-nation price."³

This EO was then superseded in September 2020 by EO 13948.⁴ As titled before, the updated 2020 EO added to the Medicare Part B model, "Section 4. Payment Model on the Most-Favored-Nation Price in Medicare Part D," which directed the secretary to also develop a payment model for Medicare Part D."⁵

These EOs defined "Most-Favored-Nation Price"⁶ as:

Following the 2020 EOs, a Most Favored Nation Model Interim Final Rule was released for comment on Nov. 27, 2020; however, it was rescinded [CMS-5528-F⁸] after lawsuits prevented implementation.

Fast Forward to 2025 — What is in the Replay?

In 2025, Trump released two key EOs surrounding the pharmacy supply chain. On April 15, 2025: EO 14273, "Lowering Drug Prices by Once Again Putting Americans First"⁹ and on May 12, 2025: EO 14297, "Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients."

EO 14273: "Lowering Drug Prices by Once Again Putting Americans First"

EO 14273 aims to reduce prescription drug costs by developing and enhancing policies surrounding the pharmacy supply chain. The order emphasizes optimizing Medicare and Medicaid drug pricing strategies; increasing access to certain drugs; accelerating the drug approval process to increase competition; actions to streamline drug importation; improving transparency in pharmacy benefit manager fees; and a report to combat anti-competitive behaviors by pharmaceutical manufacturers.

EO 14273 discussed many aspects surrounding drug pricing, but it did not mention MFN.

EO 14297: "Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients"

This most recent EO 14297 revisits the MFN theme from 2020, and states that Americans pay more for prescription drugs compared to other countries and "should not be forced to subsidize low-cost prescription drugs and biologics in other developed countries, and face overcharges for the same products in the United States." This 2025 EO requires a condensed timeframe for the HHS secretary to communicate MFN price targets and provides new concepts for the secretary, cabinet members, and agencies to engage. Here is a brief overview:

1. The term "Most-Favored-Nation" is not defined in the most recent EO. Although there is language suggesting that prices should be compared to "other developed nations," it does not define what is meant by MFN as it did in 2020, nor does it qualify "comparably developed nations" as specific benchmarks against which the U.S. should be evaluated. This was modified a week later with clarifying information provided by the HHS secretary (see #5 below).
2. EO 14297 delegates some responsibility to the Centers for Medicare and Medicaid Services for communicating MFN pricing to pharmaceutical manufacturers; however, it makes no mention of Medicare, Medicaid, or any other specific payer type, as was referenced in the 2020 EOs or EO 14273. It is unclear whether the administration's goal is to subject only the federal programs, such as Medicare and/or Medicaid, to MFN pricing or the entire drug marketplace with respect to pricing controls.
3. The most recent EO directs the secretary of commerce and the U.S. trade representative to "take all necessary and appropriate action to ensure foreign countries" are not engaged in a wide-ranging list of practices that could ultimately impact U.S. national security, are "unreasonable or discriminatory," or have the effect of disproportionately shifting the cost of pharmaceutical research and development (R&D) to U.S. consumers or suppressing the fair market price of pharmaceutical products.
4. The facilitation of direct-to-consumer (DTC) purchasing from pharmaceutical manufacturers to sell products to American patients at the MFN price.
5. The HHS secretary is directed to communicate MFN price targets to pharmaceutical manufacturers within 30 days (of the order).
   1. On May 20, 2025, the HHS secretary announced that it "expects each manufacturer to commit to aligning U.S. pricing for all brand products across all markets that do not currently have generic or biosimilar competition with the lowest price of a set of economic peer countries. The MFN target price is the lowest price in an OECD country with a GDP per capita of at least 60 percent of the U.S. GDP per capita."¹⁰
6. If "significant" progress is not achieved by pharmaceutical manufacturers after MFN price targets are announced, EO 14297 outlines additional regulatory actions, including:
   1. Development of a rule-making plan by the HHS secretary to impose most-favored-nation pricing.
   2. The HHS secretary to consider steps towards initiating the importation of drugs under section 804(j) of the Food Drug and Cosmetic Act.
   3. Based on the report to "combat anti-competitive behaviors by pharmaceutical manufacturers" (from EO 14273), the attorney general and the chairman of the Federal Trade Commission will initiate "enforcement action against any anti-competitive practices identified."
   4. The Secretary of Commerce will be responsible for understanding and acting upon the "export of pharmaceutical drugs or precursor materials that may be fueling the global price discrimination."
   5. "[T]he Commissioner of Food and Drugs shall review and potentially modify or revoke approvals granted for drugs, for those drugs that may be unsafe, ineffective, or improperly marketed."

What to Expect from the 2025 EOs? Perspectives for Consideration

Criticism of prescription drug pricing is a longstanding bipartisan issue, and one that is increasingly dominant in the public domain; however, change across the pharmaceutical supply chain has been limited, often attributed to congressional disagreements or litigation. Can we expect more of the same?

Observations:

• Can the MFN Pricing Model succeed?
  • The previous MFN efforts were faced with several injunctions, then consequently rescinded.¹¹ It seems that this model will face greater resistance from various parties in the supply chain, considering the breadth of the 2025 initiative.
    • If there is a lack of cooperation from the manufacturers to make significant progress towards MFN pricing, the secretary is directed to impose rule-making to support MFN; support from Congress could potentially extend the effort to a legislative matter.
      • Several drug manufacturers and other parties have filed cases to overturn Medicare Drug Price Negotiations under the Inflation Reduction Act (IRA); these cases are fraught with complexity, and despite the number of matters pursued, the law remains intact. If laws are implemented surrounding MFN, will it become difficult for manufacturers to avoid MFN pricing models, and what legal and regulatory challenges might emerge?
        
• How might direct-to-customer (DTC) sales impact market dynamics?
  • Incorporating a sales channel that allows pharmaceutical manufacturers to distribute medicines directly to patients could potentially bypass both pharmacy benefit managers (PBM) and retail pharmacies, with a significant potential impact on the existing marketplace.
    • If successful, a DTC pathway could significantly impact PBM and Group Purchasing Organization (GPO) negotiations, and the corresponding collection of rebates and other fees on behalf of health plans. This, in turn, could impact revenue for these organizations.
    • Pharmaceutical manufacturers might lean on mail-order pharmacies to support DTC distribution methods to maximize current infrastructure and minimize the need to develop new infrastructure.
    • Current mail-order pharmacies are largely owned by PBMs, meaning a potential negative impact on retail pharmacies as we know them. However, current and emerging state laws prohibiting in-state operations of vertically integrated PBMs and their affiliate pharmacies (e.g., mail order and specialty pharmacies), such as a ban recently passed in Arkansas,¹² could render this model difficult to maintain, meaning new approaches may be necessary.
    • In any case, reduced prescription volume through traditional dispensing outlets could lead to changes in pharmacy network pricing and network arrangements as a result of a DTC sales model.
    • Disjointed care could emerge if DTC claims are not processed through the payer (e.g., PBM or health plan). Interoperability may be difficult and lead to a complex web of pharmacy claims across many different pharmacies and payment methods.
      
• Will this change the current landscape of PBMs and health plans?
  • Any change in pricing mechanisms throughout the pharmacy supply chain, including reduced wholesale acquisition cost, or 'list price' to wholesalers of pharmaceutical products, could equate to modifications in financial strategies relied upon by PBMs and health plans.
    • As seen with the IRA Medicare Drug Price Negotiations, drug price reduction may reduce available rebates to PBMs and their health plan customers.
    • Reductions in manufacturer rebates may lead to increased patient premiums and health plan benefit reductions.
    • If pricing is established by a manufacturer at the "lowest" amount, this may reduce the need for health plans to rely on PBMs for cost control functions, including formulary development, rebate negotiation, and pharmacy network contracting. This could move health plans' demands towards an administrative-services-only arrangement.
    • The rise of the pass-through PBM model.¹³ PBMs with a fixed cost model, which are less dependent upon rebates or other concessions, may not need to prepare for adjustments in drug prices because their model is more agnostic to pricing fluctuations.
      
• Will the United States begin to import drugs?
  • Section 804 of the Food, Drug, and Cosmetic Act¹⁴paves the way for the importation of drugs sold at lower prices in other countries to be brought into the United States through a Section 804 Importation Program (SIP) approved by the Federal Drug Administration (FDA). A sponsor (such as a state government) must submit a proposal to the FDA for approval before importing specific drugs, with a plan to ensure quality control and oversight of distribution, among other things.
  • There are many onerous procedural steps that are required of a sponsor to import drugs, such as labeling, designation of a foreign seller and importer, distribution plan, quality testing, and establishing a compliance plan. This is in addition to tracking and tracing requirements under the Drug Supply Chain Security Act.¹⁵
  • While several proposals are in the works, only one SIP has been approved by the FDA to date, which was proposed by the State of Florida.¹⁶ Florida's program was authorized on January 5, 2024, after lengthy litigation brought against the FDA by the State of Florida; however, Florida has yet to import any drugs.

Footnotes

1 https://www.federalregister.gov/documents/2025/05/15/2025-08876/delivering-most-favored-nation-prescription-drug-pricing-to-american-patients

2 https://www.federalregister.gov/documents/2020/09/18/2020-20887/lowering-drug-prices-by-putting-america-first

3 Ibid

4 https://www.federalregister.gov/documents/2020/09/23/2020-21129/lowering-drug-prices-by-putting-america-first

5 Ibid

6 Id

7 https://www.oecd.org/en.html

8 https://www.federalregister.gov/documents/2021/12/29/2021-28225/most-favored-nation-mfn-model

9 https://www.federalregister.gov/documents/2025/04/18/2025-06837/lowering-drug-prices-by-once-again-putting-americans-first

10 https://www.hhs.gov/press-room/cms-mfn-lower-us-drug-prices.html

11 https://www.cms.gov/priorities/innovation/innovation-models/most-favored-nation-model

12 https://arkleg.state.ar.us/Bills/Detail?id=hb1150&ddBienniumSession=2025%2F2025R

13 "Pass-through PBMs" describe a type of PBM contract where the PBM and health plan agree to a payment model where pricing of pharmacy transactions is transparent in exchange for a negotiated administration fee paid to the PBM by the health plan. Furthermore, rebates and other savings from manufacturers (or other parties) are passed through to the plan.

14 21 USC 384: Importation of prescription drugs.

15 https://www.fda.gov/drugs/drug-supply-chain-integrity/drug-supply-chain-security-act-dscsa#:~:text=The%20Drug%20Supply%20Chain%20Security%20Act%20(DSCSA)%20outlines%20steps%20to,supply%20chain%20to%20protect%20patients.

16 Chapter 381 Section 02035 - 2021 Florida Statutes - The Florida Senate

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