The Most Favored Nation Policy: The Last Straw for U.S. Life Sciences Amid China’s Ascendancy

By: Dan Leonard, Executive Director, We Work For Health

The Administration’s latest proposal to revive the Most Favored Nation (MFN) drug pricing policy threatens to deliver a devastating blow to the U.S. life sciences industry, the millions employed by the sector and supporting industries, and the patients it serves. By tying Medicare or Medicaid drug prices to the lowest rates in other developed nations, the policy would have the catastrophic impact of killing innovation, eliminating jobs and ceding global leadership to China. The biopharmaceutical sector has created millions of jobs and hundreds of life-saving medicines and recently committed to investing billions in the U.S. economy over the upcoming years with the building of new facilities in the United States. The MFN policy would result in the decline of an industry that has long been a cornerstone of American excellence, job creation and economic growth.

Innovation and Jobs on the Chopping Block

The MFN policy would import foreign healthcare policies and pricing controls while devastating American biopharmaceutical companies and their ability to fund high-risk, high-cost research and development (R&D). The U.S. leads the world in medical innovation because our market rewards breakthroughs—over $140 billion was invested in R&D in 2023 alone, supporting millions of jobs in research, manufacturing and clinical trials. But price controls could cut this investment by billions, as warned by a 2018 Council of Economic Advisers report, which noted that adopting foreign pricing models decades ago might have cost us treatments for cancer and Alzheimer’s. Jobs are equally at risk: the sector directly employs more than 1 million Americans. That number balloons to well over 4.9 million jobs when you add in all the vendors and contractors that support the life science sector, according to We Work For Health’s own biannual data. The misguided MFN policy could force layoffs and plant closures, decimating a vital economic engine.

A Sector Already Crushed by Anti-Innovation Policy

The life sciences industry is already fighting extremely strong headwinds, battered by a series of misguided policies that have stifled innovation and deterred investment. The MFN compounds the impacts of bad policies, including the Inflation Reduction Act (IRA). Despite its name, the Biden-era IRA failed to reduce inflation but succeeded in stifling investment in new treatments. Its price negotiation provisions, particularly the “Pill Penalty,” have caused a 68% drop in small-molecule (pills and tablets) investment, according to a study by Vital Transformation. This has also led to a major decline in research into new therapies for diseases affecting senior citizens.

The IRA undermined the industry’s ability to innovate and grow. It was hoping to count on President Trump to correct course and bring American biopharmaceutical leadership safely to America instead of continuing to push it overseas to China. The Trump administration recently called on Congress to fix the pill penalty a critically important step. But it must also not impose price controls through MFN at the same time.

China’s Rise: A Stark Warning

The U.S. hasn’t always led life sciences innovation—Europe held that title until the late 1980s. But unfavorable market conditions in Europe, including price controls, hindered their ability to innovate and lead allowing the U.S. to grow. Now, China is rapidly closing the gap, doubling its research and investment annually. A striking chart from DealForma illustrates this shift: the share of global big pharma deals (with $50M+ upfront) originating from China has skyrocketed from 4% in 2020 to 42% by Q1 2025. This meteoric rise underscores China’s growing dominance in biopharma, fueled by aggressive government investments and supportive policies to lure private investment and growth. If the U.S. continues to hamstring its own industry, we will risk ceding the future of medicine to China, our access to medical innovations, and a robust industrial research and manufacturing base with high-paying jobs that follow. 

Flawed Policy, Dire Consequences

The MFN policy is built on flawed assumptions. It would have little impact on reducing drug costs for patients in Medicaid or Medicare. Medicaid already is mandated, under “Medicaid Best Price” provisions, to have the lowest costs in the country. That means that savings for patients, if any, would be inconsequential and would be overshadowed by the devastating impact it would have on innovation and access.

A Better Way Forward

We can lower drug costs without destroying innovation. Policymakers should focus on:

• Boosting Competition: Accelerate generic and biosimilar approvals to drive down prices naturally.

• Reining in the Middlemen: Follow through on President Trump’s promise to “knock out” the middleman in the drug supply chain. The U.S. is the only country to have insurance middlemen keeping more than half of the cost of medications.

• Reforming Rebates: Eliminate anti-kickback protections for middlemen pharmacy benefit managers to ensure discounts reach patients and eliminate spread pricing in Medicaid.

• Supporting Research: Restore funding to NIH and FDA to accelerate approvals and support promising research.

  
  

Call to Action

The MFN policy is a losing gamble that will kill jobs, halt innovation and hand global leadership to China—all while the U.S. life sciences sector struggles under the weight of bad policy. Every state in the union benefits from these investments as our fact sheets demonstrate. Members of Congress need to consider the compounding effect of the disruptive policy stew we are in right now, the harm to U.S. competitiveness and state economies, and reject this proposal and demand solutions that preserve American innovation.