Why the Math on MFN Doesn't Add Up: A Conversation with Peter Kolchinsky of RA Capital Management
- Jul 30
- 2 min read
We Work For Health's Executive Director Dan Leonard recently sat down with Peter Kolchinsky, founder and Managing Partner of RA Capital Management and author of The Great American Drug Deal, to discuss what Most Favored Nation pricing policies would mean for biotech investment and the future of American medicine.
Kolchinsky brings a unique perspective to this debate, having spent nearly 25 years making investment decisions that hinge on the very policy questions Washington is now wrestling with.
Below are some of the key moments from their conversation.
Every Investment Decision Runs on the Same Math
Before a single dollar goes into drug development, investors run what's called a Net Present Value, or NPV, model — a framework that weighs the potential value of a medicine against the cost, time, and risk of bringing it to market. Kolchinsky walks through how each variable, including patient population, price, insurance coverage, patent life, development costs, and competition, feeds into that calculation, and why the math ultimately determines which projects get funded and which do not.
Cures Are Calculations
Kolchinsky makes the case that experienced investors have an innate understanding of the economic frameworks governing drug development, and an innate ability to recognize how policy tweaks — real and proposed — will impact those frameworks and inform investment decisions.
MFN Pricing Upends the Business Model
Under MFN pricing, companies face a stark choice: charge U.S. prices everywhere and risk other countries refusing to pay or abandon those international markets altogether. Kolchinsky explains that, in practice, the only realistic path is the latter. But that means walking away from ex-U.S. partnerships, shelving plans for international launches, and dealing with the ethical issues around running clinical trials in countries where a drug might never be available to patients.
America Already Has a Built-In Price Control
Novel medicines represent just 8% of total U.S. healthcare spending, a share that has held steady for decades. Kolchinsky makes the case that spending on innovative medicines should be thought of more like an investment than an expense — like paying a mortgage rather than rent. Our investments in medicines pay off for patients and keep paying off for society long after patents expire and drugs go generic. He contrasts that with spending on hospitals and physician services, which only rises over time.
Watch the full conversation with Peter Kolchinsky to learn more about what MFN pricing would mean for biotech investment, drug development, and patient access to future medicines.