Blog | 8/5/2025

Navigating MFN Price Targets

By Jeff Abraham, Michael Davitian, and Tarek Plaza 

Summary

• Most Favored Nation (MFN) price targets require manufacturers to match US prices for branded drugs to the lowest ex-factory prices in select Organisation for Economic Co-operation and Development (OECD) countries
• Wholesale Acquisition Costs (WAC) reductions may range from 40% to over 90%, depending on therapeutic area and competitive dynamics abroad
• Direct-to-Patient (DTP) models may offer a pathway to preserve revenue by bypassing intermediaries
• Digital DTP platforms can provide a foundation for long-term innovation in drug access, patient engagement, and care delivery

Policy Context

On May 20, 2025, HHS and CMS jointly announced Most Favored Nation price targets for branded drugs lacking generic or biosimilar competition. Under Executive Order 14297, manufacturers are expected to align US prices with the lowest ex-factory price available in a defined set of peer countries. Eligible reference countries include OECD members with GDP per capita of at least 60 percent of the US (up to 24 countries based on 2024, as shown in Fig. 1). The agencies have indicated that the pricing policy applies across “all markets,” signaling that price alignment should extend to both CMS and commercial channels. The administration expects manufacturers to begin voluntary price alignment following the announcement and has indicated that, if progress is insufficient, it may pursue formal rulemaking and other enforcement actions.

As follow up to the May announcement, the White House called on 17 drug companies in a letter on July 31^st detailing the necessary steps to comply with MFN pricing. The letters were sent to AbbVie, Amgen, AstraZeneca, Boehringer Ingelheim, Bristol Myers Squibb, Eli Lilly, EMD Serono, Genentech, Gilead, GSK, Johnson & Johnson, Merck, Novartis, Novo Nordisk, Pfizer, Regeneron, and Sanofi.

Impact on Pricing

The administration projects that MFN pricing could reduce the cost of affected drugs by 30 to 80 percent. In practice, aligning with the lowest ex-factory prices across reference countries may lead to even greater reductions in US WAC prices, depending on therapeutic area and market dynamics (Fig. 2). For rare disease treatments, where international pricing tends to be more uniform, the lowest MFN benchmark may still fall 40 to 50 percent below current US WAC. In oncology, German ex-factory prices, often among the lowest, could represent approximately a 60 percent discount relative to US levels. In competitive categories such as type 2 diabetes, where generic alternatives are widely available abroad, MFN prices could be more than 90 percent lower than prevailing US WAC prices.

Rethinking the Supply Chain

A key provision of Executive Order 14297 is its directive to “facilitate direct-to-consumer purchasing” of drugs at MFN prices. HHS has been tasked with establishing mechanisms that would allow patients to purchase medications directly from manufacturers, bypassing traditional intermediaries such as pharmacy benefit managers (PBMs) and specialty pharmacies.

Today, intermediaries play a central role in shaping US drug prices by negotiating rebates off list prices while retaining a portion of the savings. Under MFN pricing, list prices may move closer to international benchmarks, significantly reducing the spread between gross and net prices and challenging the economic foundation of the PBM model. As these margins compress, stakeholders across the supply chain may face increasing pressure to adapt or redefine their roles.

For manufacturers, direct sales offer a potential buffer against the financial impact of MFN targets by enabling greater control over both pricing and patient access. While operationally complex, this model could help preserve net revenue, streamline the value chain, and open the door to broader innovation in care delivery and patient engagement.

Opportunities in Direct-to-Patient (DTP) Models

DTP models may offer pharmaceutical companies a potential pathway to adapt to MFN pricing while enhancing the patient experience. In practice, these models may combine telehealth consultations, digital prescribing, and home delivery, allowing patients to access medications directly through manufacturer-run platforms. In bypassing traditional intermediaries, including potentially PBMs and specialty pharmacies, manufacturers could potentially enhance patient access and care delivery, while providing patients with a more affordable path. For some highly competitive drug classes—such as insulin, anticoagulants, and anti-TNFs—where PBM rebates can range from 30% to 80%, MFN pricing may largely replace those rebates, resulting in a relatively modest impact on net price for the manufacturer. However, for products that do not currently offer substantial rebates, MFN pricing could significantly compress margins, making alternative models like DTP increasingly important as a strategic lever.

Examples of direct-to-patient engagement are already taking shape. LillyDirect, launched by Eli Lilly in early 2024, connects patients with virtual care providers and ships selected medications—such as Zepbound for weight loss—directly to patients through partnerships with Amazon Pharmacy and other fulfillment providers. Similarly, Pfizer’s PfizerForAll platform enables patients to consult clinicians online and receive treatments like Nurtec or Paxlovid delivered to their door. Most recently, Roche announced they are exploring the direct-to-patient option as a way to “take out these people in the middle.”

These efforts mirror a broader industry shift seen in platforms like Hims & Hers, which have long integrated telehealth and pharmacy services to deliver care directly to consumers. While such models streamline access and enhance transparency, they have also drawn attention from policymakers raising concerns about potential conflicts in prescribing. The concern is that these platforms lead to unnecessary prescriptions for patients.  Thus, capturing the full potential of DTP models will depend on building trust through independent, clinically-driven access pathways.

With digital infrastructure now well established, the entry of pharmaceutical companies into DTP models may accelerate adoption and create new opportunities for a wider variety of treatments to become available through these channels. These platforms may not just be a pricing workaround; they offer a strategic opportunity to reimagine patient engagement, adherence, and brand loyalty. For companies navigating MFN-driven margin pressure, investing in direct digital channels may become a critical lever not only to preserve value but to shape the next wave of innovation in pharmaceutical care.

Conclusion

While the full implementation path and long-term effects of MFN pricing remain uncertain, the policy reflects a disruption of traditional pricing and distribution models. This shift positions manufacturers to take a more direct role in patient access and care delivery. It presents an inflection point, with a particular opportunity to expand DTP models that simplify access, enhance engagement, and maintain greater control over pricing. As companies navigate this evolving landscape, those that take a careful and compliant approach to rethinking distribution and commercialization will be better positioned to create value in a more patient-centered and digitally enabled market.

References

1. https://www.hhs.gov/press-room/cms-mfn-lower-us-drug-prices.html
2. https://www.whitehouse.gov/presidential-actions/2025/05/delivering-most-favored-nation-prescription-drug-pricing-to-american-patients/
3. https://www.whitehouse.gov/fact-sheets/2025/07/fact-sheet-president-donald-j-trump-announces-actions-to-get-americans-the-best-prices-in-the-world-for-prescription-drugs/
4. https://www.fiercepharma.com/pharma/roche-weighing-direct-consumer-drug-sales-ease-us-drug-pricing-woes-cut-out-pbms-ceo-says