The renewed debate over Most Favored Nation (MFN) drug pricing in the United States reflects a legitimate frustration: Americans consistently pay more for prescription medicines than do patients in other high-income countries. MFN, now being tested in Medicare and Medicaid demonstration models, ties U.S. drug prices to those paid in other countries; this approach is often referred to as external reference pricing.
While many factors lead to high prescription drug prices, a key issue is the fragmentation of the U.S. health care system. Prescription medicines are purchased and reimbursed through a patchwork of public and private payers, each negotiating separately with manufacturers. This set-up limits bargaining power, particularly for high-cost therapies.
New research from the Commonwealth Fund examines how six health systems — in Australia, Canada, England, France, Germany, and Sweden — manage access to novel high-cost medicines and finds that price differences reflect institutional design rather than just international price benchmarks. These countries assess the value of medicines, negotiate prices collectively, and manage uncertainty about long-term clinical outcomes while protecting patients from financial risk.
Like the United States, all six countries face intense political and budgetary pressure when purchasing high-cost medicines. Most use external reference pricing, but as a supporting tool rather than the primary policy lever. In many cases, these benchmarks rely on publicly listed prices rather than the confidential discounts that payers actually negotiate, which means they may not reflect what is paid in practice. This can weaken the effectiveness of benchmarks as a standalone strategy. The World Health Organization guidelines recommend external reference pricing only when combined with strong analytic capacity to evaluate medicines and prices, price negotiation, and mechanisms to revisit prices as new clinical evidence emerges. This indicates that implementing MFN in the U.S. would be a shortcut that attempts to replicate outcomes without building the governance structures that produce them.
Price Is an Output, Not a Policy
Across high-income countries, lower prices are not achieved simply by referencing what others pay. They are produced through formal processes for assessing value and negotiating accordingly.
In these systems, structured health technology assessment (HTA) — a systematic evaluation of a medicine’s clinical benefit and value for money — provides the institutional backbone, creating a shared evidence base for decisions about what health systems should pay for new medicines, especially when clinical benefits are uncertain and long-term outcomes are unknown.
Germany, for example, requires that all new medicines undergo an early benefit assessment that compares them with existing therapies. If a drug demonstrates additional clinical benefit, manufacturers and the statutory health insurance system negotiate a price; if not, reimbursement may be limited or aligned with lower-cost alternatives. This process explicitly links pricing discussions to evidence about therapeutic value.
This evidence does not dictate prices, but it anchors negotiations and legitimizes trade-offs among access, affordability, and innovation. In other words, price is not the starting point of policy; it is the result of governance choices.
The U.S. lacks a formal national HTA body, although independent organizations conduct value assessments that sometimes inform payer decisions, resulting in a more fragmented and less consistent approach to evaluating new medicines.
Stronger Negotiation Comes from Pooling Buying Power
International experience shows that collective negotiation does not require a single-payer system.
For example, in Canada, provinces and territories are responsible for funding and delivering health care, including prescription drug coverage. The pan-Canadian Pharmaceutical Alliance (pCPA) allows them to negotiate drug prices collectively, pooling bargaining power to secure lower prices for publicly funded medicines.
This approach demonstrates that consolidated leverage, rather than a single-payer system, is what enables effective negotiation for high-cost therapies. For expensive therapies, in particular, individual purchasers lack bargaining power and budget impact is highly concentrated.
The U.S. system remains highly fragmented by comparison, with many separate public and private purchasers negotiating independently. U.S. insurers also face additional constraints, including antitrust laws that limit collective negotiation and further weaken bargaining power. Even with recent Medicare negotiation reforms, authority is limited in scope and scale and does not address the broader dispersion of purchasing across the U.S. health system.
High-Cost Medicines Require Flexibility
International systems differ most from the United States in how they handle uncertainty.
Many countries now allow early access to specialty medicines through managed entry agreements — that is, temporary arrangements that allow patients to use medicines while payers gather additional evidence and limit financial risk.
Most of these arrangements are not sophisticated “pay-for-performance” contracts, but involve tools like confidential discounts, spending caps, and scheduled reassessments as more evidence accrues.
For instance, through England’s Cancer Drugs Fund and Innovative Medicines Fund, the health system can make a determination that evidence for a novel high-cost medicine is promising but uncertain and decide the therapy may receive temporary coverage while additional real-world data are collected. After a defined period, the therapy is reassessed to determine whether it should receive routine coverage.
Similar mechanisms in other systems reflect the same principle: when evidence is incomplete and prices are high, the systems rely on negotiated, conditional arrangements rather than fixed pricing decisions. Crucially, these models treat patient protection as a system responsibility. Once a medicine is covered, out-of-pocket costs are usually capped and catastrophic spending is largely prevented, even when access is conditional or temporary.
Affordability Is Built, Not Benchmarked
Americans are concerned about paying more for medicines than patients do in other high-income countries. But international experience shows that while MFN may offer a politically attractive shortcut to lower prices, benchmarking alone cannot substitute for the institutional processes that determine value and negotiate prices.
Lower prices emerge from systems investing in evidence, negotiating collectively, and managing uncertainty through adaptive financing models, while embedding patient protection as a core policy goal.
For U.S. policymakers, the lesson is not that international prices should be copied, but that international institutions matter. The real question is not what other countries pay, but how they decide what is worth paying for.
