Most-Favored-Nation Drug Pricing Policy: Executive Actions, Manufacturer Agreements, and Growing Congressional Scrutiny

The current Administration has made “most-favored-nation” (MFN) pricing a central pillar of its pharmaceutical policy agenda, with a focus on comparing U.S. drug prices with prices paid in other developed countries and addressing what it characterizes as foreign “free riding” on U.S.-funded innovation. This policy priority has been articulated in a variety of ways, including most recently in an April 2026 Executive Order that links tariff relief and other benefits to manufacturers’ willingness to enter into MFN pricing and domestic production agreements while establishing significant tariffs on companies that decline to do so.

In recent months, CMS has also proposed but not yet finalized two MFN payment models, referred to as Global Lowest Observed Benchmark Exchange (GLOBE) Model for certain drugs payable under Medicare Part B and the Global Uniform Alignment for Reasonable Drug Prices (GUARD) Model for certain drugs payable under Medicare Part D. Final rules for GLOBE and GUARD are expected in the coming months. During this same period, CMS has also implemented the voluntary GENErating cost Reductions fOr U.S. Medicaid (GENEROUS) Model for certain drugs payable under Medicaid, which is now open through April 30th for pharmaceutical manufacturer applications.

It has also been widely reported that in recent months the Administration has taken steps to secure additional manufacturer participation in MFN pricing arrangements. These efforts have included direct engagement with identified pharmaceutical companies to negotiate agreements to secure a commitment by the manufacturers to provide MFN pricing on their products.

At the same time, the Administration’s MFN activities have drawn increasing scrutiny from Congress, with lawmakers questioning both the transparency of reported MFN arrangements and their implications for competition, innovation, and federal spending. In addition, federal and state legislative activity continues to evolve, with policymakers considering potential statutory approaches to advance the White House’s agenda with respect to MFN, though these efforts have yet to gain traction in Congress.

Against this backdrop, the Administration’s expanding focus on MFN pricing, combined with trade-based enforcement threats under a new Executive Order, and Congressional scrutiny, results in a potentially fluid policy landscape that stakeholders across the pharmaceutical industry and investor community should closely monitor. We provide additional detail regarding these recent developments below.

April 2026 Executive Order: Adjusting Imports of Pharmaceuticals Into the U.S.

On April 2, 2026, President Trump issued an Executive Order titled “Adjusting Imports of Pharmaceuticals and Pharmaceutical Ingredients into the United States,” which determined that imported pharmaceutical products present a threat to U.S. national security. The Order imposes additional tariffs on certain imported pharmaceuticals and ingredients. The Order also directs federal agencies to use trade authorities, including the further adjustment of the tariffs, to incentivize pharmaceutical manufacturers to shift production to the U.S. and align their pricing with MFN benchmarks.

Specifically, the Order directs federal agency action to address reliance on imported pharmaceuticals and active pharmaceutical ingredients (“APIs”), which the President has concluded “threaten to impair the national security of the United States.”¹ The Order identifies what the Administration characterizes as risks associated with reliance on foreign supply chains and directs federal agencies to take steps to strengthen domestic production of pharmaceuticals and pharmaceutical ingredients.² The accompanying Fact Sheet similarly emphasizes that the policy is intended to “protect our national security, and strengthen American manufacturing” while reducing reliance on foreign production of patented pharmaceutical products.³ The Executive Order also discusses “economic welfare” considerations, which is in tension with the statutory basis for Section 232 tariffs, which is limited to national security.

The Order establishes a tariff framework for imported patented pharmaceuticals and related inputs and conditions relief from such tariffs on manufacturers’ commitments to domestic manufacturing and participation in MFN pricing arrangements with the U.S. government. Specifically, the Order provides

• 0% tariffs for companies that enter into MFN pricing agreements and into tariff agreements that commit to U.S. onshoring⁴
• 0% tariffs on imports of generic pharmaceuticals and their associated ingredients, including biosimilar products⁵
• 15% tariffs for products originating from certain allied jurisdictions (including the European Union, Japan, Korea, Switzerland, and Liechtenstein)⁶
• 20% tariffs for companies with tariff agreements that include approved domestic manufacturing plans⁷
• 100% tariffs for patented pharmaceutical products and ingredients⁸

Taken together, the tariff regime effectively directs federal agencies to create a “re-share and re-price or pay” structure. This policy approach underscores the Administration’s broader strategy of leveraging trade authorities to incentivize manufacturer alignment with domestic pricing and production objectives.

Update on GLOBE and GUARD Models

The public comment period for the GLOBE and GUARD Model proposed rules closed on February 23, 2026. Stakeholders submitted 188 comments on the GUARD Model proposed rule and 157 comments on the GLOBE Model proposed rule.

A final rule for the GLOBE Model is expected to be issued at least 60 days in advance of the proposed October 1, 2026, effective date. The final rules have not been sent to the Office of Management and Budget (“OMB”) for final clearance as of this Update.

Congressional Scrutiny of MFN Agreements

Certain members of Congress are scrutinizing MFN agreements with a particular focus on their structure, transparency, and potential downstream effects on federal programs. In early 2026, lawmakers sent a letter to the Administration requesting copies of executed agreements, additional detail on pricing commitments and enforcement mechanisms, and analyses of the anticipated impacts on Medicare, Medicaid, and federal spending more broadly. Separate correspondence to pharmaceutical manufacturers sought clarification on how MFN pricing commitments are operationalized, including whether and how such arrangements are expected to generate savings and how they interact with existing statutory rebate obligations.

These inquiries reflect concerns among policymakers regarding the limited public visibility into the terms of MFN agreements, uncertainty regarding their interaction with established pricing frameworks, and questions regarding the impact of such agreements on federal spending. There are also reports of forthcoming legislation from Senator Wyden that would require disclosure of MFN agreements, further underscoring congressional interest in transparency. Collectively, this scrutiny suggests that congressional oversight of MFN-related initiatives is likely to intensify as these agreements continue to emerge and evolve.

Proposed Federal Legislation Related to MFN

In addition to executive actions aimed at encouraging manufacturers to commit to providing MFN pricing, legislation supporting President Trump’s MFN policies has been introduced in the U.S. House of Representatives. Specifically, Rep. Debbie Dingell (D-MI) introduced H. Res. 928, supporting MFN drug pricing, while Rep. Dan Meuser (R-PA) introduced H.R. 7837, the Most Favored Patient Act to incentivize manufacturers to participate in MFN pricing agreements with the Administration. Both the Dingell and Meuser measures were referred to the House Committee on Energy & Commerce Committee. The Meuser bill was also referred to the House Committee on Ways & Means. Both committees have jurisdiction over Medicare policy. President Trump has also publicly advocated for codification of MFN policies, including in his remarks during the State of the Union address on February 24, 2026. Despite strong support from the Administration, MFN legislation is unlikely to pass Congress this year.

Previous State Efforts Linking Drug Pricing to International Prices

Between 2021 and 2023, legislatures in several states — including Hawaii, New York, North Carolina, North Dakota, Oklahoma, and Rhode Island — introduced legislation aimed at incorporating international reference pricing into their Medicaid programs. Despite this activity, these efforts to establish state-level MFN-like regimes did not gain meaningful legislative traction or advance to implementation.

More recently, state policymakers have shifted away from international reference pricing models and instead focused on alternative mechanisms for prescription drug costs, particularly through proposals to establish upper payment limits for certain so-called high-cost drugs. Many of these initiatives center on the creation of prescription drug affordability boards (PDABs), which are tasked with reviewing drug prices and, in some cases, setting payment ceilings. Pharmaceutical manufacturers have begun challenging state PDAB laws, most notably in Colorado, where the plaintiffs in pending litigation have raised constitutional and preemption claims, including arguments that state-imposed upper payment limits violate the Dormant Commerce Clause and fail to satisfy due process requirements under the Fourteenth Amendment.

This evolution in state approaches underscores a trend toward domestically driven pricing controls rather than reliance on international benchmarks.

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The current MFN policy landscape continues to evolve, with strategic analysis as a high priority for stakeholders, including investors. The current environment is particularly opaque for companies in late development readying for launch and for companies and investors outside the U.S. Unmet need remains a critical north star for innovative companies and must be buttressed with a deep understanding of what could be next in drug pricing policy, including how emerging MFN initiatives may shape commercialization strategies, global pricing dynamics, and investment decisions.