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The United States has long led the world in developing new medicines. This edge didn’t come by accident. It’s the result of decades of strong intellectual property rights, major investment in research and development (R&D), and a free-market system that rewards risk and innovation. These factors have built a thriving biopharmaceutical ecosystem, one that not only delivers life-saving treatments but also fuels job growth, economic expansion, and American global influence.
But this leadership is now under threat.
In May 2025, a new executive order titled “Delivering Most-Favored-Nation (MFN) Prescription Drug Pricing to American Patients” introduced a policy that could upend the foundation of U.S. pharmaceutical innovation. The order aims to peg the prices Medicare pays for certain innovative drugs to the lowest prices charged in other wealthy countries. While this might sound reasonable on the surface, the real-world consequences could be far more damaging than anticipated.
What Is MFN Pricing and Why It’s a Problem
Under the new plan, the U.S. Department of Health and Human Services (HHS) would benchmark U.S. drug prices against a group of more than 20 countries—including the UK, South Korea, and Lithuania—whose per capita GDP is at least 60% of the U.S. GDP.
But there’s a catch: these countries either set drug prices by law or negotiate directly with manufacturers. They also often delay or restrict access to new medicines due to budget constraints or centralized health systems. Tying U.S. prices to these artificially suppressed benchmarks imports their price control models and risks exporting our innovation advantage.
Short-term savings may appear attractive on paper, but they come at a high cost: reduced investment in R&D, slower innovation, fewer jobs, and limited access to cutting-edge treatments.
Learning from the Past and Others’ Mistakes
This isn’t the first time MFN-style policies have been floated. The Trump Administration tried a similar approach in 2018 and 2020 through the International Pricing Index and MFN model proposals. Both efforts were met with legal challenges and strong opposition from industry experts, patient groups, and economists, and both were eventually shelved.
Why the backlash? Because when governments impose strict price caps, companies reduce R&D spending. A 2020 study estimated that implementing MFN pricing could cut the number of new medicines developed by small biotech firms by as much as 90%, while wiping out nearly 1 million U.S. jobs over a decade.
Another report by economists Tomas Philipson and Troy Durie found that MFN-style policies could slash U.S. pharmaceutical R&D by $663 billion and result in 135 fewer new drug approvals by 2039. These numbers aren’t just theory—they’re a warning.
China Is Closing the Innovation Gap
While the U.S. debates price controls, China is charging ahead. In the past five years, American firms launched 267 new active drug substances, but China is catching up fast with 192 launches. That’s more than Europe, which clocked in at 182.
China’s biopharmaceutical sector is benefiting from massive government subsidies, low production costs, and fewer regulatory burdens. And unlike many Western countries, China sees pharmaceutical dominance as both an economic and strategic priority. If the U.S. hobbles its biopharma industry with misguided policies, we risk handing over the future of medicine—and global leverage—to Beijing.
The strategic risks go beyond innovation. China already controls much of the global supply chain for drug ingredients and has shown it’s willing to use that leverage. If the U.S. becomes more reliant on Chinese pharma, we expose ourselves to supply chain disruptions and geopolitical blackmail.
Better Solutions to Share the Cost of Innovation
The core issue MFN policies attempt to fix—other countries’ “free-riding” on American innovation—needs to be addressed. But price controls aren’t the solution. There are smarter ways to balance fairness and competitiveness:
- Make Trade Work for Innovation
Use international trade negotiations to push high-income countries to contribute more toward drug development costs. Congress has already considered creating a Chief Pharmaceutical Trade Negotiator within the U.S. Trade Representative’s office to do just that. - Build a Global Alliance for Innovation Funding
Establish a NATO-style commitment among allies where each country pledges to spend a fixed percentage of its GDP on innovative medicines. This would prevent governments from underpaying while benefiting from U.S.-led breakthroughs. - Push for Europe-Wide Drug Investment Targets
Encourage the European Union to set a region-wide target for spending on innovative medicines. Aligning prices and rewards for innovation would reduce the pressure on U.S. prices and limit policy arbitrage between countries.
America Can’t Afford to Fall Behind
The biopharmaceutical industry isn’t just another sector—it’s a strategic asset. It saves lives, boosts the economy, and strengthens America’s global position. Ceding leadership in this field would leave the U.S. and its allies more dependent on China at a time when national security threats are rising.
As Michael Kratsios, former White House science advisor, put it, we need a strategy that promotes our innovators and protects our edge. That means rejecting policies that undermine the very system that made the U.S. the global biotech leader in the first place.
The U.S. should lead the next generation of drug discovery, not shrink from it. Let’s not trade tomorrow’s breakthroughs for today’s political soundbites.
Stay informed with WorldAffairs.org—where policy meets impact.
Author Profile
- Li Li, associate professor and master’s supervisor at Southwest University. B.A. in English for Education from Southwest Normal University, M.A. in English Translation and Interpretation from China Foreign Affairs University, Ph. D. in Japanese Cultural History from Nankai University (all above are in China). Also has studied at Osaka Sangyo University and Kokugakuin University in Japan and been a Fulbright visiting scholar to Western Kentucky University in US. A multidisciplinary and versatile instructor with a trilingual mastery of Chinese, English and Japanese, known for Combining foreign language teaching with history and humanity cultivation. Academic researches center on Japanese history, international relations and Western culture studies. Work experiences include teaching at Capital Normal University, Chongqing Normal University, and Southwest University. Has published multiple academic papers, translated works, authored or co-edited several textbooks and monographs; provided language services for several high-level and high-profile international events.
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