Most Favored Nation Could Repeat the Inflation Reduction Act’s Failed Promise

A recent landmark U.S. health care law touted as the most significant prescription drug-price reform in decades appears to be already falling short of its promise. The harmful consequences are at risk of repeating as Washington considers expanding government price controls through most favored nation (MFN).

The Inflation Reduction Act (IRA), passed in 2022, instituted a $2,000 annual out-of-pocket cap on Medicare Part D drug costs that took effect last year. The legislation was billed as a major win for seniors, and for a narrow group of beneficiaries with very high drug spending, it has been. But in 2025, researchers at the USC Schaeffer Center for Health Policy & Economics found that fewer seniors benefit than the law's proponents suggested.

Only about 5% of non-low-income-subsidy beneficiaries are projected to reach the $2,000 threshold. For the other 95%, the story is very different.

Medicare Advantage plans, responsible for covering most Medicare beneficiaries, apparently have responded to the IRA's redesign by shifting more costs onto patients before they ever reach that cap. That’s been done through higher deductibles and a widespread switch from flat-fee copayments to coinsurance structures, which tie patient costs directly to list prices.

Among Medicare Advantage Prescription Drug plans, average deductibles nearly quadrupled, jumping from $62 in 2024 to $224 in 2025. The share of those plans using coinsurance for preferred brand drugs surged from just 2.6% to 27.5% in a single year.

A Warning About What Comes Next

The affordability failures documented are part of a broader pattern: The IRA has already begun reshaping where and how American companies invest in research and development – and not for the better.

Industry leaders and independent analysts have warned that the law's innovation-limiting provisions, including shortened exclusivity windows for small molecule drugs, are pulling capital away from promising research programs.

Some policymakers are pushing to go even further by proposing MFN pricing models, which would import foreign price controls into Medicare. The USC Schaeffer findings make clear why that path is the wrong one. The IRA demonstrated that government price controls do not reliably deliver savings to patients at the pharmacy counter. But they do deliver uncertainty for researchers, disruption for investors and advantages for China and other U.S. competitors.

America can lower drug costs and lead the world in medical innovation but not with policies that have already proven they don't work.

This study’s findings are a reminder that real affordability means targeting a system's real problem. That means holding corporate middlemen accountable, protecting the investment ecosystem that delivers life-saving treatments, and rejecting price control proposals that promise relief for patients while quietly delivering it to insurers, pharmacy benefit managers, and foreign competitors.