MFN, DTC, and the Policy Pressure Cooker: Reshaping the US Drug Market

A panel of experts discussed the impact of Most Favored Nation (MFN) tariffs and Direct-to-Consumer (DTC) channels on drug markets, highlighting potential effects on drug pricing, patient access, and pharmacy operations. The session, moderated by Ronald W. Lanton III, senior partner at Lanton Law, included perspectives from:

Lindsay Greenleaf, JD, MBA, is head of policy, research, and analysis at ADVI Health. She leads ADVI’s policy team, translating legislative and regulatory analysis into commercialization and access strategies for clients spanning the pharmaceutical, biotechnology, device and diagnostic industries, as well as physician practices and specialty societies. Before joining ADVI, Greenleaf spent 6 years with The McManus Group where she developed and negotiated legislative solutions with stakeholders, congressional staff and members of Congress.

Stacie B. Dusetzina, PhD, is a professor in the Department of Health Policy and an Ingram professor of cancer research at Vanderbilt University School of Medicine. She is a health services researcher focusing on the intersection between health policy, epidemiology and economics related to prescription drugs. Dusetzina’s work has contributed to the evidence base for the role of drug costs on patient access to care and policy changes that might improve patient access to high-priced drugs.

Neal Masia, PhD, is co-founder and CEO of EntityRisk, Inc., and founder of Health Capital Group, LLC, with expertise spanning health economics, strategic business development, and market access, following nearly two decades in senior leadership roles at Pfizer. He is also an Adjunct Professor of Management and Economics at Columbia University..

Segment 1: MFN and the Policy Pressure Cooker

Lanton: Is MFN fundamentally a political negotiating tactic, or does it contain the structural components needed to become a permanent, long-term price reform?

Greenleaf: I think MFN as a concept is certainly here to stay, especially during the Trump administration. For this to be something structural that has really long-term implications, you're obviously looking at Congress for legislative changes. What's in front of us right now is more of an administrative focus. We're looking at what President Trump can and might do using his administrative authority, and of course, before we ever get to that, we're looking at these voluntary agreements that are playing out. If we get enough of those from manufacturers in the near term, maybe we won't ever see any formal proposal come out of the Trump administration using that administrative authority. I think we'll be talking about this for at least 2028, and depending on who's in the White House after that, this doesn't seem to be a topic that's going away anytime soon.

Lanton: I was going to ask about that, because we hear a lot about this GLOBE and this GUARD model, but I'm not sure what to think of it.

Greenleaf: Both are acronyms for proposed rules that are awaiting their final review at the Office of Management and Budget (OMB), which is the last step of the regulatory review cycle. This is a signal to us that the Trump administration is ready to go with something as a proposal in the form of a CMMI (Center for Medicare and Medicaid Innovation) demonstration model. GLOBE, or the Global Benchmark for Efficient Drug Pricing Model, is speculated to be related to Medicare Part B. GUARD, or the Guarding US Medicare Against Rising Drug Cost Model, is rumored to be related to Medicare Part D. There are also rumors about a potential Medicaid demo.

The significance of CMMI is that they have a ton of power to implement big policy changes with Medicare. They have the power to waive all of Title 18 when doing a demonstration project. This means they can implement a policy change that affects Medicare, with the limiting factors being that it shouldn't affect all Medicare beneficiaries and it should not go on forever (but can still be a really long time, like five to seven years).

The scale of disruption can be seen by what was tried in 2020: the MFN model for Part B drugs proposed that physician-administered drugs be reimbursed based on an MFN price, which translated to reimbursement of ASP minus 65% on average—a huge cut.

Whether the new models come out depends on the Trump Happiness Index. If you have a steady stream of manufacturer announcements coming to the table with these voluntary agreements—like Pfizer, AstraZeneca, and EMD Serono—there could be a scenario where GUARD and GLOBE don't come out at all, as MFN goals would be achieved through voluntary deals. But if the announcements stall, that's when we might see the proposals come out of CMMI.

Lanton: Neal, assuming MFN creates a reference price floor in Medicare, how does that economically compress commercial payer negotiations? The second question is, what level of commercial price spillover should payers be modeling for?

Masia: I question whether they'll really create a floor in Medicare in any formal sense. If you try to set a benchmark that's too low, the simple solution for the companies is to not launch in those countries, which is what they will do. There's an inherent limit that's probably equal to the average net price difference between the U.S. net price and the net price in these other countries—probably a 15 or 20% range.

I think the bigger issue on the commercial side is that it's very much in play because of automatic linkages either through 340B or otherwise. This will clearly affect negotiations, even if it's just for your competitors. For example, in the bidding war right now for the obesity drug (GLP-1s), if they announce a serious price cut (say, a $1200 price down to a $200-$300 cash price), it makes it very tough for the next-generation product to compete. So, the companies and payers should be thinking about that as a real pressure, especially in areas where the innovation is pretty good. It's less impactful in rare disease niche areas.

The point is, it's an interconnected web of prices, some in an automated way through government-mandated discounts and some in a more therapeutic competition way. The net result is higher volatility in terms of pricing, which will impact commercial launch planning for sure.

Lanton: Neal, you said something very interesting about 340B. Do you have any quick comments about that?

Masia: The short explanation of 340B is that it's a highly opaque program that accounts for something like 15-25% of our whole drug ecosystem. It's a mandated discount that companies have to give to certain designated entities (hospitals, grantees). They buy drugs for, say, $80 or $90 billion and get reimbursed for $150 or $200 billion. It raises premiums and flows through the whole ecosystem.

The reason it's relevant to the MFN debate, and linked to Medicaid, is that the price in 340B is formally linked to the Medicaid discount. To the extent that MFN filters through in these Medicaid deals, it probably has an impact on the 340B price, which means bigger discounts slash bigger profits for the covered entities.

A lot of what these voluntary deals have been oriented toward has actually been to disintermediate the PBMs. The direct-to-consumer models are a way to disintermediate them. This is all being driven by the non-articulated MFN threat slash tariff threat. The trick was to not have a policy, but to have the threat of a policy to get everybody to the table to see what they'll shake loose.

Lanton: Stacie, if tariffs on foreign-manufactured branded drugs were actually implemented, what is the most immediate impact on patient care in terms of access to care, delayed treatment, or cost, in your opinion?

Dusetzina: If we take it to the limit, and your branded product has a 100% tariff applied, you have to think about whether your competitor has one applied. Ultimately, if the price increase goes through to the plan, it's coming through to the beneficiary eventually in higher cost-sharing and higher premiums.

As we've seen across the board with tariffs on all kinds of goods and services in the U.S. this year, that usually means the customer in the U.S. is going to end up picking up the tab.

The intriguing thing here is that the threat of tariffs has brought companies to the table to provide some sorts of concessions around pricing. It was a big enough threat that companies saw how detrimental tariffs have been to other industries. So, it has gotten people open to having a conversation in a way that perhaps the MFN talk didn't. It's more of a bargaining chip rather than something we should expect to see applied broadly.

Segment 2: The Direct-to-Consumer Supply Chain Disruption

Lanton: Lindsay, when a patient uses a Direct-to-Patient (DTP) channel for prescribing and fulfillment, how does this disrupt the continuity of care? And what are the key compliance reliability risks for manufacturers facilitating prescription and fulfillment, especially regarding the Anti-Kickback Statute (AKS)?

Greenleaf: Critics will argue that DTP programs disrupt continuity of care because you are cutting the pharmacist out of the scenario and the dialogue with the patient. You might not have the same level of careful monitoring for things like drug interactions. This risk depends on the drug; those with the greatest safety concerns might not be right for a program like this.

Regarding compliance concerns and the Anti-Kickback Statute (AKS), it depends on how the DTP program is defined. When we talk about DTP, we are generally thinking cash pay. The AKS prohibits inducing federal business (Medicare, Medicaid). If it's a cash pay program and you are bypassing those concerns, you generally do not have a big AKS concern for the most part.

Where things get interesting is if we broaden the DTP definition to where insurance plays a role. Folks are working on ways the AKS might allow Medicare to somehow play a role in this supply chain, but that's not quite clear yet. A traditional DTP program, as we would think of it, does not present a big compliance concern.

Lanton: Neal, from a manufacturer's perspective, what is the primary business driver for DTC? Is it truly about patient affordability, or is it a calculated move to capture first-party data and avoid rebate payments?

Masia: Companies have been chasing direct-to-patient models for many years, well outside of the MFN debate. The GLP-1s have really been the accelerant because of the lack of coverage. I think it's much more about trying to break the hold that the PBMs have on the gross-to-net and the rebate strategy—to get them off the treadmill. I don't think capturing data is the main driver, as limitless real-world data is available elsewhere.

Not every product is right for DTP; it tends to be more like pills and some injectables, not physician-administered drugs. If I'm a manufacturer, I see this as a good channel for some of my portfolio. I can share the rebate that I would have given to a PBM in the form of a better net price to a consumer.

The model is heading toward one where patients may pay cash and then submit for reimbursement from their insurance company. Companies were traditionally gun-shy about this model, worried about being crosswise with distributors, but I think the cat is out of the bag, and major companies will start setting up these models for products where it can work.

Lanton: Stacie, DTC bypasses PBM negotiations for insurers. How does this loss of negotiating leverage impact formulary management? And are we seeing payers implement new utilization management tactics to counter DTC usage?

Dusetzina: I think we're still in very early days here, and we're seeing most DTC be used for cash pay patients outside of their traditional payers. A huge challenge for disrupting the PBM rebate model is the vertical integration that has happened among health plans and PBMs. The idea of breaking away from that and disrupting the current model might mean sacrificing local hospital and provider networks, which makes it very difficult to disrupt the top three PBMs.

I view this, at least initially, as being more for cash pay patients. However, there is a real risk here for patients: your employer and your plan may potentially not cover certain drugs that they otherwise might have more pressure to include under the benefit. We are definitely seeing this with GLP-1s. Anecdotally, large employers are rolling back coverage for these products with the perception that people can just go and get them under a cash pay model outside of their health insurance plan benefit. This can lead to real problems with access.

Lanton: Let me ask you a copay accumulator adjacent question then, Stacie. If a patient gets a drug via DTC that does not count towards the deductible, how might that decision negatively impact their total health care spend later that year?

Dusetzina: This is frustrating because the average person has very low health insurance literacy. Using GLP-1s as an example: if you're facing a deductible of $2,000, you might see that your first month of treatment is over $1,000, and the cash pay option through the website is $500. It looks cheaper now, but you have to take into account out-of-pocket maximums.

If that cash-pay drug does not count toward your deductible, you'll have to pay the full deductible amount out of pocket for other medical services later in the year, which can lead to higher total healthcare spend. Patients need to compare the total cost of filling it on their plan over the year versus just looking at that one individual fill. For a lot of people, the lure of the immediate cash savings might lead to a greater financial burden later on when they face large, uncovered bills because their deductible remains unmet.

Here is the remainder of the transcript, condensed and focused on the speaker responses to the moderator's questions.

Segment 3: Remaining Policy Pressure Points

Lanton: Neal, if the 340B margins tighten on high-cost drugs due to the MFN, how likely are hospitals to reevaluate or potentially cut ancillary patient services that were previously cross-subsidized by 340B revenue?

Masia: It's tough to piece together how hospitals would fare in an environment where the 340B price is forced down even further. They generally stand to make money when the 340B acquisition price is lower. The challenge is if it also affects the Average Selling Price (ASP). A lower 340B acquisition price is good for hospitals; a lower ASP is bad for 340B entities and hospitals.

You can't evaluate these things in a vacuum. Companies are smart. You can't do anything about the drugs already launched in most of these countries. However, we are seeing some fruits of this policy on the European side, which the Trump administration was hoping for. For example, the UK is talking about raising their prices (the value they assign to a Quality Adjusted Life Year, or QALY). Since many other European countries' prices are linked to the UK price, a 25% increase there would have serious ramifications. This delivers on the administration's promise to industry: "Let us help you get those countries to pay up," which is a legitimate argument.

On a go-forward basis, if a company is planning its launch strategy for high-cost drugs that hospitals make all their money on, they may decide not to launch in Europe for five or ten years. Ironically, this could mean higher prices here in the US, depending on how things play out.

I think the dynamic might be more on the physician side than the 340B hospital side. Physicians are often living in an ASP plus 6% universe. For them, pushing prices down is clearly a negative as it would definitely affect their compensation as physicians.

Lanton: Stacie, to finish this segment, when the MFN price is floated, Medicaid is often cited as a potential savings area, but its current pricing is already highly favorable. Is the talk about MFN saving Medicaid money primarily a political talking point, or is there a pathway to any real savings? Furthermore, what is the access risk for low-income patients if MFN-like pricing pressure causes companies to opt out or restrict participation in safety net programs?

Dusetzina: As a researcher, the lack of specific details accompanying pretty much all the announcements is highly frustrating. In the limited details available in the Pfizer agreement, for example, the word "voluntary" is repeated many times, even regarding the use of Most Favored Nations pricing in Medicaid, which seems like the most substantial part.

When you look at current Medicaid pricing, it can already be doing better than what the Most Favored Nations price would look like. Because of policy changes a couple of years ago that removed the inflation cap, there are some products where, theoretically, the company would owe money to Medicaid because the price increase has gone up so fast that the drug is now "underwater" with the Medicaid program. If you took an MFN price (the average of a set of countries), you could actually potentially be paying more in Medicaid under that scenario. I would hope you wouldn't increase spending, but without the details, you don't know.

Given all the tools Medicaid programs have to secure standard discounts, inflation penalty discounts, and supplemental rebates, it's a stretch to say that MFN will yield a significant amount of savings for that program.

When it comes to access for low-income beneficiaries, most companies have Medicaid drug rebate agreements, making products accessible to people in Medicaid. If companies decided they were no longer interested in participating, that would mean a loss of access for those beneficiaries, which is a serious concern. We have seen some companies, when they theoretically would have to pay whenever their drugs are used, withdraw their products from the market altogether, which is very disruptive. Sometimes these policies go too far. I worry about potential access issues for patients. Just last week, we saw one company withdrawing some of its products from 340B and Medicaid, potentially as a result of these pricing pressures.

Final Advice and Q&A

Lanton: Before we move into our final Q&A segment, what is your single most important piece of advice right now?

Masia: If you are a drug company trying to understand the interplay between launching, pricing, and selling a drug, the reality is we are not currently in a stable policy framework for that. We're making individual deals one at a time. The advice is to be really smart about how you explain the value of whatever drug you're selling, not just to the payers, but making sure the patients understand the value of that medicine in a language they can understand. Be really clear about how they can access that drug, whether directly from you or through the insurance company, and then hold the insurance companies accountable. Talking about value used to be optional in the U.S. market, and now it's really critical. Having a good value story is the most important thing you can do to prepare to launch a drug in the U.S.

Greenleaf: Invest heavily in policy analytics. The government's involvement in healthcare is not going to slow down anytime soon, whether it's Trump or someone else, or Congress decides to do more legislating. Manufacturers who have invested in standing up new divisions called "policy analytics" are doing far better than the ones who are trying to catch up. The pace is frantic. You need to stay on top of the rumor mill and formal proposals. On the voluntary deal front, you need to know what you're offering. Do you have something appropriate for a DTP program? Do you have products appropriate for Medicaid and MFN? Do you have enough runway in your future launches to promise the White House that your future launches will not be at a price lower than the U.S. price? You have to be ready and able to answer all those questions within minutes.

Dusetzina: Pay attention to the details and don't feel like you have to be the first one out of the gate with a response. With things like GLOBE and GUARD, the text of which is not available, there is this huge rush to guess what's going to happen. For those of us working in policy, those details matter a lot to what the ultimate impact on any change is going to be. So, take a breath and see what kind of details you actually can find, because the news is coming very fast these days and is very light on detail.

Lanton: Stacie, the FDA announced a push to streamline biosimilar approvals. Does the threat of internal generic competition, such as biosimilars, factor into a manufacturer's decision to embrace or resist the external pressures of MFN and DTC channels, and does greater biosimilar competition make MFN pressure easier or harder?

Dusetzina: When we first saw the letters to the companies that were basically a list of demands, my immediate thought was that as soon as we hear people making deals, it's going to be on drugs at the end of their patent life. That's the first sacrifice to make—something that everybody recognizes but that has generic competition right around the corner. It's not as big of a loss of revenue because the patent cliff was expected. Biosimilars are definitely in the mix there. Companies are thinking about what product they can offer that makes a really nice-sounding deal but has a very limited revenue impact.

Maja: I think the biologics issue won't go the way it was announced. When people start digging in, they'll realize there's a good reason to have the current amount of testing on those biosimilars. They're not as easy to make as a pill. Patients and consumer advocates will soon come to realize that you don't want to screw that up, and the investment required is such that if there isn't an economic return, you just won't see any biosimilars. I think that will turn out, in the midst of time, to not look the way it was announced earlier this week.

Lanton: What are your thoughts regarding vouchers, withdrawal from Medicaid, and 340B?

Dusetzina: For low-income patients, this is really a concerning issue. While a lot of drugs on Bausch's list are generic, so maybe some will be available at low cost, this adds to the complexity and the maze that is the 340B program and its spillover effects with MFN.

Masia: Asking companies to keep selling into a program where they're literally losing money is not a business person's idea of a good idea. So, it is not surprising to see them withdraw. This just indicates that the economics don't work for that company in that program. There are lots of examples where if this isn't true now, it will soon be true for certain products, as 340B is growing 20-30% a year. At some point, it will be just uneconomical to participate in those programs for lots of products.

Greenleaf: The idea that, with the Inflation Reduction Act (IRA) change that repealed the AMP cap, there are companies out there that have to pay the government for the pleasure of providing drugs to people—that is a mess. It's unfortunate, but not surprising, to see things like this happen.