The US’ latest drug pricing policy and what it means for the world

What’s happened so far

The May 2025 executive order directed the Centers for Medicare & Medicaid Services (known as CMS) to establish MFN price targets — defined as the lowest price offered to any OECD country with a GDP per capita of at least 60 per cent that of the United States — and to communicate those targets to manufacturers.

The administration’s approach to-date has relied heavily on deals rather than legislation.

Pfizer was the first major manufacturer to reach an agreement on September 30, 2025, followed by AstraZeneca and EMD Serono, then Eli Lilly and Novo Nordisk — makers of the world’s highest-selling medicines, the GLP-1s, in November.

In December 2025, nine further companies joined the list: Amgen, Bristol Myers Squibb, Boehringer Ingelheim, Genentech (Roche), Gilead, GSK, Merck, Novartis, and Sanofi.

In exchange for offering MFN prices across Medicaid — the US program targeted at low-income populations — and for new drug launches, companies receive a zero percent tariff rate through January 2029.

This exemption was formalised in April 2026, when the administration imposed a tariff of up to 100 percent on imported patented pharmaceuticals, with specific exceptions. Companies holding both an MFN pricing agreement and an onshoring commitment face are exempted from any tariff.

Separately, in relation to MFN pricing, CMS has proposed two mandatory regulatory models for Medicare — the federal program that provides coverage for Americans aged 65 and over:

• GLOBE (for Medicare Part B, which covers clinically administered drugs such as cancer therapies and treatments for autoimmune conditions)
• GUARD (for Medicare Part D, which covers drugs typically provided through pharmacies).

GLOBE and GUARD would codify the MFN international benchmarking concept into formal programs using reference prices from a basket of 19 countries, including Australia (at this stage the list does not include New Zealand).

In terms of international community pharmacy relevance, the GUARD model may be the one to watch most closely.

It is proposed to cover 17 therapeutic categories including cardiovascular agents, diabetes medications, antivirals, and respiratory agents.

As a parallel track to the same policy, CMS has also launched the “GENEROUS” model for Medicaid — which is the state-run program that covers low-income Americans.

Under this model, the benchmark is the second-lowest net price from a reference group of eight countries, which are Canada, Denmark, France, Germany, Italy, Japan, Switzerland and the United Kingdom.

This model has been implemented from January 1 2026 but is voluntary for both manufacturers and states.

Adding to the mix, the direct-to-consumer online platform TrumpRx has just been launched.

Although touted as providing ground-breaking access to lower pricing, its practical significance appears limited: the platform explicitly does not accept insurance, so it primarily benefits the minority of Americans who are uninsured or who prefer to pay out of pocket.

It also covers a relatively small list of drugs, and is essentially a price comparison and referral portal — directing patients to participating pharmacies or to manufacturers’ own direct-to-patient platforms.

Most Americans covered by insurance plans will continue accessing medicines through their existing channels.

The first international casualty of MFN?

Perhaps the most significant “canary in a coal mine” example so far comes from Denmark.

In early 2026, Amgen withdrew Repatha (evolocumab) from the Danish market — reportedly the first such market withdrawal widely attributed to MFN-related pressures.

Because Denmark is included in the US reference pricing basket, a low Danish price becomes a price anchor that can directly constrain what a manufacturer can charge in the American market.

This has prompted Denmark to establish a dedicated MFN task force, with its pharmaceutical industry association warning that companies are actively reconsidering whether to launch new products in the country at all, given the downstream implications for US pricing.

A world of price-makers and price-takers

One of the more illuminating frameworks to emerge from analysis of MFN’s global effects is the distinction between “price-maker” countries and “price-taker” countries.

Price-makers establish prices through an independent process using health technology assessment (HTA) and direct negotiation.

These include a small number of European countries, as well as Australia (the PBS) and New Zealand (Pharmac).

Most other countries are “price-takers”: they reference or benchmark against prices already set elsewhere.

As the US moves toward its own form of international reference pricing, the logic of this system becomes strained.

If the US seeks to pay near the lowest price in the OECD, and most OECD countries already reference each other, the entire pricing architecture risks a “race to the bottom” in which only a shrinking group of countries anchor the system — and manufacturers respond by managing, or avoiding, those anchor markets.

This has direct implications for how pharmaceutical companies will sequence global launches.

The financial rationale is not complex: if launching in a low-priced market reduces what you can charge in the world’s most profitable market, then launching in that low-priced market becomes a costly decision.

The QALY question

Another dimension of MFN which deserves attention is the implied export of health technology assessment frameworks — and particularly the Quality-Adjusted Life Year (QALY) valuation approach — into US pricing discussions.

Australia, New Zealand and the United Kingdom use QALY-based HTA to assess the cost-effectiveness of new medicines against existing therapies.

While this is widely used across Commonwealth countries, it is worth noting that the use of the QALY is actually prohibited under US federal law in some contexts, including Medicare, on the basis that it can be discriminatory.

A person living with a disability or chronic illness typically has a baseline QALY score of less than 1.0, meaning that a treatment extending their life is mathematically valued less than the identical treatment for a non-disabled person — which could, in theory, lead to denying coverage to those most in need.

The US is not adopting QALY-based analysis for its own drug assessments. However, by benchmarking prices against countries that do use QALYs, MFN in effect imports the consequences of those QALY decisions into the American market.

The UK, for its part, is already adjusting in response: as part of its bilateral economic deal with the US, the NHS is raising its cost-effectiveness threshold from a range of GBP20,000– 30,000 to GBP25,000–35,000 per QALY gained, explicitly allowing higher drug prices for new innovative medicines.

Country responses

Countries are responding to the new environment in various ways:

• The UK is negotiating higher prices for innovative medicines while seeking to protect its broader trade relationship with the US.
• Many EU countries are reinforcing their HTA systems while quietly adding greater confidentiality to their negotiated prices to reduce their visibility as reference points.
• And there is growing discussion of whether IP protections should be conditioned on manufacturers actually launching products across all markets.

A paper tiger or a structural shift?

Perhaps the most important question is how durable these policies are.

Executive orders are not legislation, and previous attempts by the Trump administration to implement MFN during its first term were successfully challenged in court and subsequently rescinded by the Biden administration.

Formal rulemaking would be required to extend MFN beyond current voluntary arrangements, and that process is vulnerable to both legal challenge and political change — with the upcoming mid-term elections a notable inflection point.

Before April 2026, MFN and tariff threats could have been characterised as political manoeuvring, aiming to extract concessions from manufacturers and pressure from trading partners that may, in themselves, be enough of a “win” for the Trump administration.

The formal imposition of tariffs in April 2026 significantly changes that characterisation.

The tariffs transform MFN from a voluntary arrangement into the primary mechanism for avoiding a punitive trade penalty.

Unlike the executive order route used in the first term, the new tariffs use a “Section 232” authority (which derives from national security trade powers) that has historically proven more resilient to legal challenge.

The voluntary manufacturer agreements already signed represent real price concessions.

The GLOBE and GUARD regulatory proposals represent a serious effort to embed international reference pricing into Medicare law.

And the Section 232 tariffs now provides structural enforcement for the entire framework.

The pharmaceutical industry is responding: companies are entering into new agreements, adjusting launch sequencing, raising prices in some lower-priced markets, and making large manufacturing investment commitments in the US.

Access to new medicines in smaller, lower-priced markets may become slower and more contested — a genuine concern for Australia and New Zealand.

The global pricing dynamics that shape what drugs reach formularies like the PBS and Pharmac’s schedule, on what timeline, and at what cost, are changing in ways no single country can fully control.

In Australia and New Zealand, the applicability of the new 100 per cent tariff rate has been well-publicised through mainstream media.

The tariff structure also creates an explicit country-level hierarchy.

The UK secured a separately negotiated preferential tariff rate as part of its December 2025 bilateral deal.

The EU, Japan, South Korea, and Switzerland are grouped at a 15 per cent rate.

However, Australia and New Zealand are not named in any exemption category, meaning patented pharmaceuticals manufactured in either country and exported to the US would face the full 100 per cent tariff unless the exporting company holds an MFN and onshoring agreement.

This further reinforces the commercial incentive for manufacturers to either sign MFN deals or shift production to the US — both of which have implications for how, and on what timeline, innovative medicines may reach the PBS and Pharmac.