First Few Details on MFN Pricing Emerge from HHS

Following up on Donald Trump’s May 12 Executive Order on Most Favored Nation Prescription Drug Pricing (see our post here), The Department of Health and Human Services today issued a brief press release answering two of the multitude of questions raised by the Executive Order.  First, most favored nation (“MFN”) pricing will apply only to brand products without generic or biosimilar competition.  In other words, MFN pricing will apply only to single-source innovator drugs, and not to ANDA drugs or biosimilars.  The reference foreign countries will include only those in which the drug similarly does not have generic or biosimilar competition.

Second, the MFN target price will be the lowest price in a country that is a member of the Organisation for Economic Co-operation and Development (“OECD”) with a gross domestic product (GDP) per capita of at least 60% of the U.S. GDP per capita.  According to the U.S. Mission to the OECD, the organization currently has 38 member countries.  At the time of CMS’s November 2020 final rule with comment period to implement MFN pricing under Medicare Part B (a rule that was ultimately invalidated by several courts for procedural defects and then withdrawn), CMS had determined that 22 OECD countries had GDP per capita above the 60% threshold.  The 22 countries were identified in the preamble (click here), though that list may have expanded somewhat during the past 4½ years.  Like the previous regulation, the HHS press release states that HHS will use the lowest price among the economic peer countries.  However, a straight comparison between another country’s price and the U.S. price does not take into account differences in purchasing power between the two countries.  To address this problem, the 2020 regulation would have adjusted the comparator country’s price by calculating a ratio of its GDP per capita divided by U.S. GDP per capita, then dividing the country’s price by that ratio.

The May 12 Executive Order directed HHS, within 30 days, not only to develop MFN targets but to communicate them to pharmaceutical manufacturers.  The next questions likely to be answered are what the nature of those communications will be and which manufacturers will receive them.  To be continued . . . .