I did a double-take seeing last week’s Economist article on the most-favored-nations (MFN) pricing policy. This policy was announced via Executive Order by the Trump administration in May.

It’s not every day that international drug pricing makes its way into The Economist!

Today, we’ll spend some time unpacking MFN and playing out what could happen if it were implemented.

But First, a Little Background

As far as I can tell, the nitty-gritty details of how (and if!) MFN would be implemented are still up in the air.1 But generally, MFN would cap US branded drug prices at the lowest price found in peer countries for the same product.2

The Trump administration has been very public in its stance that other countries are “freeloading” off the American healthcare system, and that MFN is a way to make others pay their fair share for drugs and innovation.

Pharmaceutical trade groups have publicly opposed MFN as a threat to innovation.3 Academics have argued that MFN would abdicate decision-making to foreign governments, and that the US should develop its own drug value and pricing rules.

Many have warned that MFN would limit and delay access to new medications outside of the US.

MFN’s Uneven Impact: Three Scenarios

Setting aside the uncertainty around how (and if!) MFN would be implemented, it’s worth playing out how this policy could impact drug prices, market access, and drug development incentives.

To do this, let’s consider three drugs with different profiles:

1. Commodity (with generic competition)

2. Medical breakthrough

3. Incremental improvement

For this thought experiment, we’ll keep things high-level and gloss over the many nuances of ex-US drug pricing and market access. We’ll also make a few simplifying assumptions:

1. MFN only applies to new drug launches

2. France is the reference country

3. List prices are referenced (no confidential rebates or discounts)

4. MFN applies to branded drugs that don’t have generic or biosimilar competition4

Commodity

For branded me-too drugs with generic or biosimilar comparators, it’s unlikely that MFN would create big changes. These products are typically priced at generic levels in countries like France, and these markets are increasingly skipped by manufacturers in this situation.

MFN might formally exclude these therapies from consideration, but if not, launching at generic prices would only risk pulling down US revenues. The net effect would be marginal, with manufacturers opting for a few more skipped launches in ex-US countries.

Drugs with this profile are US-focused today and would remain so under MFN.

Medical Breakthrough

For true breakthroughs (say, a curative therapy for pancreatic cancer), MFN would strengthen manufacturers’ leverage abroad.

For example, if France’s CEPS set too low a price,5 companies would face a binary choice: accept it and risk US revenues, or walk away. With US sales on the line, the threat of walking away would become much more credible.

At the same time, countries like France face intense pressure to provide timely access to medical breakthroughs. That political urgency, combined with manufacturers’ stronger bargaining position, would likely push prices higher.

Whether this would result in higher global revenues would depend on the magnitude of ex-US price increases versus US price decreases. The net effect would likely range from neutral to positive.

Since ex-US countries spend less of their GDP on drugs,6 any new spending on breakthrough therapies would require: 1) higher overall drug budgets (slow, resisted), 2) cuts to other social spending (politically hard), and/or 3) less spending on other drugs (most likely - see Incremental Improvement).

Incremental Improvement

MFN would present the most challenges for drugs that are better than standard of care (but not game changers) and benchmarked to branded comparators.

Today, such therapies often launch in markets like France at prices close to incumbents (but still well below US levels). Some health systems reimburse them for their incremental benefits, others do not.

With MFN, however, these lower prices would flow back into the US market, making ex-US launches less attractive. At the same time, governments facing higher costs for breakthrough therapies - but unwilling to expand overall drug budgets - would be even less likely to pay for incremental improvements.

The likely outcome for these drugs would be manufacturers opting to delay or forego access in ex-US markets. In some scenarios, this could even push manufacturers to raise drug prices in the US to make up for lost revenues.

Reduced access to these therapies would directly impact patients. Treatment responses can vary due to patient genetics, comorbidities, tolerability, and other factors - the ‘incremental’ drug with minimal average benefit might be the only effective option for thousands of patients.

The Warped Curve and Pharma’s Response

In a normal market, we’d expect drug development incentives to rise steadily from commodity drugs, to incremental improvements, to breakthroughs.

MFN would bend that logic via a “warped curve” (see figure). Incentives would be unchanged for commodity drugs, reduced for incremental improvements, and increased for breakthroughs.

That distortion would force companies to rethink several development and commercialization strategies. Among these shifts, one likely response would be increased focus on precision-targeting for drugs in ex-US markets.

By using diagnostics, AI tools, and clinical decision algorithms, these manufacturers could position “incremental” therapies as breakthroughs for specific patient subgroups - such as cancer patients identified through biomarker testing.

This strategy would lead to narrower market access (i.e., smaller patient populations) in ex-US markets, but at premium prices that don’t erode US revenues.

Teams responsible for pricing, access, and evidence generation would need to engage much earlier in development to shape trial design and subgroup strategies. Geographic launch sequencing would become even more strategic and interdependent.

There would also be more incentive to monitor ex-US real-world drug utilization and prevent drift into lower-value populations that could trigger re-evaluations and costly price cuts that flow back to the US.

Finally, MFN would also alter licensing strategies. Small biotechs often out-license ex-US rights to larger firms with market access infrastructure. With ex-US prices feeding back into US revenues, those deals would become riskier with more complex contingencies. That added friction could slow licensing and early-stage investment.

Key Takeaways

MFN would create distinctly different outcomes depending on the drug.

Breakthrough therapies would gain leverage, likely commanding higher prices in ex-US countries. Incremental improvements would face the worst economics, with many manufacturers opting to delay or forego ex-US markets entirely. Things wouldn’t change much for me-too drugs with generic competition.

This dynamic would alter the risk-reward calculation of pharmaceutical R&D - breakthrough innovations and precision-targeted therapies would become more attractive, while broader incremental improvements would become less attractive.

Some drugs would see higher international prices, but at the cost of reduced therapeutic diversity and patient choice.

“There are only two ways to make money in business: one is to bundle; the other is to unbundle.” Jim Barksdale, former CEO of Netscape

There has been a lot of interest this year in direct-to-consumer (DTC) platforms, digital services that connect patients with prescribers and drug fulfillment.1 LillyDirect (Eli Lilly) was one of the first DTC platforms announced in January 2024, and manufacturers like Novo Nordisk, Pfizer, and others have since followed suit.

Manufacturers are positioning these platforms as tools to reduce access barriers, increase patient choice, and ultimately improve patient health.

Within LillyDirect, for example, patients seeking care for obesity, migraine, and other conditions can connect with independent telehealth providers and get Lilly drugs shipped to their homes. Patients can also pay cash at discounted prices if they lack insurance coverage. From Lilly’s CEO:

A complex U.S. healthcare system adds to the burdens patients face when managing a chronic disease. With LillyDirect, our goal is to relieve some of those burdens by simplifying the patient experience to help improve outcomes

LillyDirect offers more choices in how and where people access healthcare, including a convenient home delivery option to fill Lilly medicines they have been prescribed

These DTC platforms represent a striking departure from the traditional pharma model of scientific research, clinical trials, and FDA approval. But if we look closer, we can see these DTC efforts as just one piece in a broader shift.

Twenty years ago, a winning combination in pharma was to have an FDA-approved drug with strong patents and marketing campaigns. Today, drugs face more competition, governments are putting pressure on prices, and vertically-integrated payers are making access and reimbursement more difficult.

Manufacturers are realizing that competitive advantage now depends on the ‘bundle’ surrounding each drug - the offerings, evidence, and commitments that create value beyond the molecule itself.

These bundles create value for different stakeholders - patients, payers, governments, and society - but all ultimately strengthen the manufacturer's competitive position.2

The Bundle Toolkit

Looking across the industry, I see five elements in particular that manufacturers are building into their bundles with respect to the US healthcare system.

These categories show us new ways that manufacturers are thinking about value - reducing uncertainty (treatment targeting, financial risk sharing, evidence and transparency), reducing friction (patient experience), and directing social benefit (geographic investment).

1. Treatment Targeting

Not every patient responds equally to treatment. Companion diagnostics, clinical algorithms, and AI-based predictions can lead to higher odds of treatment success. These offerings have been particularly prominent in oncology, where more treatments are being paired with biomarker-based diagnostics.

Providers are also critical players here, since tests and tools only add value if they’re embedded in routine care. Better targeting improves outcomes for treated patients and strengthens positioning with payers (value to patients and payers).

2. Patient Experience

Even the most effective therapy won’t create value if patients can’t access it. Patient support programs, nurse navigators, and DTC platforms are all designed to reduce friction in the care pathway, making it easier for patients to start and stay on therapy (value to patients). For some treatment areas, these offerings may also help win back direct relationships with patients and weaken the gatekeeper role of payers and PBMs.

The patient experience also depends on reliable drug availability. From GLP-1 shortages to gene and cell therapy constraints, manufacturers are investing heavily to make sure timely drug supply keeps up with demand.

3. Financial Risk Sharing

In addition to standard rebate-based contracts, some manufacturers are also offering innovative payment models (e.g., outcomes-based contracts, annuities, warranties) with rebate contingencies for payers if a patient doesn’t respond to therapy.

By sharing financial risk, these arrangements reduce uncertainty and provide greater assurance of treatment value (value to payers). However, logistical challenges around specifying outcomes, data collection, and policy barriers have led to relatively limited adoption of these models in the US.

4. Evidence and Transparency

Since "you can't value what you don't measure," manufacturers are investing heavily to generate new forms of real-world evidence.

Sophisticated technologies like patient wearables, digital companion apps, and ambient scribes are capturing richer and more continuous data - such as wearables that track Parkinson’s symptoms between visits and continuous glucose monitors that capture blood glucose in real time.

But generating evidence is only half the equation. Strategic decisions around data transparency - whether to share more granular data or real-time data feeds with payers or society at large - can build trust and accelerate coverage decisions (value to patients, payers, and society).

5. Geographic Investment

While not a traditional service that accompanies drugs, investment decisions around where to run clinical trials, build factories, or fund research are becoming increasingly important parts of the bundle strategy.

These investments effectively become part of the value proposition to governments - ‘we’ll bring jobs, skills, and tax revenues if you provide favorable pricing and access conditions’ (value to governments and society).

Just last week, several pharmaceutical companies cancelled UK investments, citing unfavorable conditions around drug pricing and access in the country. In the US, companies are pledging billions in new investment in response to anticipated tariffs on pharmaceuticals.3

These investment decisions are ”zero-sum,” as the same investment cannot be made in more than one place. Companies that master geography-as-strategy may protect pricing and access in key markets, while others may face hurdles.

The Takeaway

In the 20th century, patents and marketing campaigns defined pharma’s competitive moat. In the early 21st century, advantage went to companies that secured timely, favorable coverage - often through strong evidence packages and effective payer engagement.

Today, the bundle surrounding a drug is a critical part of this moat. The question is no longer “how valuable is our drug?” but “what bundle do we build around it?” Too few elements risk weak differentiation, but too many add cost and complexity.

The right mix will depend on the treatment area, company capabilities, and competitive context - rare disease therapies may focus more on innovative payment models and evidence generation; high-volume primary care drugs may focus more on reducing broad access barriers.

For market access and health economic teams, this will require a shift in thinking around value. Teams that quantify the value of the full bundle - not just the standalone molecule - will be better positioned to stay ahead of these shifts and build stronger cases for access and reimbursement.

The Wall Street Journal had a great article last week about how Spotify and others were able to loosen the grip of Apple’s App Store. Per the article, these companies used multiple strategies over a ~10-year period to bring about real change.

Coincidentally, I’ve been reflecting on the tremendous market power that health plans and pharmacy benefit managers (PBMs) have these days.1

Just a few months ago, CVS Caremark made the decision to exclude Zepbound (Eli Lilly) as a weight management treatment from its standard commercial formularies, instead preferring Wegovy (Novo Nordisk). Caremark was not shy about this being a financial decision, likely driven by rebate arrangements with Novo. From Caremark:

CVS Caremark® is committed to helping to lower out-of-pocket drug prices and drive better health outcomes for consumers by going head-to-head with drug manufacturers to negotiate discounts […]

That's why we recently partnered with Novo Nordisk to significantly increase access to Wegovy for our members at a more affordable price. On July 1, 2025, we will take a formulary action to prefer Wegovy and remove Zepbound

Now that’s a lot of power to exclude an FDA-approved drug, especially as the PBM for ~90 million Americans. Formulary exclusions are now standard practice, first making headlines a decade ago when Express Scripts blocked Gilead’s hepatitis C drugs in favor of AbbVie’s Viekira Pak. The GLP-1 category is the latest example of this power being exercised across a broad treatment class.

As long as vertical integration continues across US insurers, PBMs, and other entities, it is hard to imagine a world where these challenges go away for pharma. On the contrary, getting a drug favorably positioned with payers and PBMs seems to be more challenging each year.

Given these dynamics, one wonders how manufacturers can strengthen their hand. As this WSJ article highlights, the App Store may offer some lessons.

But first, some background

The App Store was first launched in 2008 and led to an explosion in the mobile app market. Over the next two decades the iPhone became the dominant mobile platform in the US, beating out competitors like BlackBerry and Nokia.

As the dominant mobile player, Apple also became a gatekeeper between iPhone owners and mobile apps. At first, Apple leveraged this position to charge a 30% fee on new app downloads. Apple extended this 30% fee when it rolled out new services for in-app purchases (2009) and in-app subscriptions (2011).2 Analysts estimate that App Store sales alone made up ~8% of Apple’s 2024 revenues (~$30B).

Tensions grew over time as app developers became more publicly opposed to the “Apple tax”. Ironically, the iPhone’s superior app experience was a big contributor to its success in the first place (I can’t be the only one who remembers trying to use Facebook on a BlackBerry…). But this symbiotic relationship eventually became lopsided as Apple concentrated its market position.

Turning back to pharma…

Of course, the App Store analogy only goes so far in pharma. Consumers can easily switch from iPhone to Android, but can’t easily switch PBMs. And unlike Apple, PBMs/GPOs negotiate on behalf of plan sponsors with finite budgets.

But, with that disclaimer out of the way, we can see real similarities between the App Store and PBMs:

• Gatekeeper marketplaces: Apple controls app access via the App Store; PBMs control drug access via formularies

• Rent extraction: Apple takes a 30% cut of app purchases; PBMs profit on drug sales via fees, rebate retention, and spread pricing

• Rule-based leverage: Apple enforces App Store rules; PBMs impose tiers, exclusions, and utilization management

• Competition with suppliers: Apple sells its own apps (e.g., Apple Music); PBMs now market private-label biosimilars

• Profit incentives: Apple gains from apps with bigger in-app spending; PBMs gain from drugs with bigger rebates

Like the App Store, PBMs and pharma manufacturers began with a more symbiotic relationship fueled by the expansion of drug coverage in the United States, but rising drug costs and vertical integration shifted the balance of power over time. PBMs remain the gatekeepers today, but now operate in a system designed to minimize drug spend, making access harder for manufacturers.

So what can be learned from the App Store?

From the WSJ article, Spotify, Epic Games, and others used multiple tactics to chip away at the App Store’s dominance. These spanned legal and regulatory challenges, platform workarounds, innovative data generation, and broad stakeholder engagement - and it took nearly a decade to see real change.

1) Encourage legal and regulatory changes: The first tactic was relentless legal pressure and sharper messaging that cast Apple as a modern-day “robber baron” that raised costs for consumers. Over time, that consistency, combined with global regulatory pressure, led to more favorable rulings for app developers.

We can see echoes of this strategy in biopharma today. Industry trade groups like PhRMA, BIO, and NPC have sharpened their message that PBM “middlemen” drive up drug costs and threaten innovation - a theme now repeated by CEOs and lawmakers. New coalitions like the IRA Watchdog (Merck, AstraZeneca, BMS, Lilly) are coordinating to amplify the industry’s stance. Lawsuits have already been filed over Caremark’s decision to exclude Zepbound, and similar legal challenges are likely in the future. The impact of these efforts remains to be seen, but the trend points toward more collective action and legal pressure on PBMs.

2) Work around the platform: Because Apple’s 30% fee applied only within its ecosystem, companies like Epic Games tried steering users to non-App Store purchases. Apple resisted, but courts eventually forced it to allow some workarounds.

Drug makers are experimenting with similar strategies. For example, LillyDirect connects patients to independent telehealth prescribers and fulfillment through partners like Amazon Pharmacy and Truepill. These models may be most successful in treatment areas where payer coverage is inconsistent and patients are willing to pay out-of-pocket (e.g., weight loss, migraine), but are unlikely to gain traction in higher-cost areas like oncology. Interest in direct employer contracting is also resurfacing, though adoption remains limited by logistical and scalability challenges.

3) Prove that gatekeepers are impacting outcomes: Spotify generated its own data through A/B testing (via Google Play) to show how App Store-like rules impacted purchase behavior. This evidence eventually supported legal and regulatory challenges.

In biopharma, demonstrating the patient impact from formulary restrictions is a nontrivial exercise. “Non-medical switching” is often cited, but connecting restrictions to worse adherence and outcomes can be complicated by data limitations and the need for complex analyses. It’s possible that new sources of evidence, such as real-world data from patient support programs (PSPs) and direct-to-consumer platforms, could better capture the necessary data to quantify these impacts.

4) Be so good they can’t ignore you: Spotify and Epic Games were successful businesses because customers loved their products. This consumer backing made it harder for governments and lawmakers to dismiss their challenges.

For manufacturers, the best leverage comes from developing drugs so effective they can’t be excluded or substituted. This leverage can be strengthened by enhancing the overall value of those therapies: targeting rare and underserved conditions, generating robust evidence of benefit, bundling with diagnostics and support services, and offering innovative payment models.

Increasingly, manufacturers are also engaging a diverse set of stakeholders beyond insurers - including governments, advocacy groups, employers, and providers - to widely communicate the value of their drugs and broaden the constituency for access.

The App Store example shows that even the most entrenched gatekeepers can be challenged once enough stakeholders are compelled to act. The same may prove true for PBMs. But just as it took Spotify and Epic Games nearly a decade to bring about change to the App Store, manufacturers may need to prepare for the long haul – and one where multiple strategies are pursued at the same time.

Sitting here in 2025, it is incredible to think how far the biopharmaceutical industry has come in the last 30 years. Many forms of cancer are now treatable, rare and ultra-rare diseases are getting approved therapies, GLP-1s are upending weight management, and we can now cure a chronic disease like hepatitis C. And the list goes on!

But despite these advances, there are also many headwinds for pharma right now. Thirty years ago, the main challenge for manufacturers was winning regulatory approval. Today, getting a drug approved is just the first step. Payer coverage, pricing pressures, and geopolitics now all factor into whether drugs will actually reach patients.

That shift is what Pain in the Access will focus on. This publication is about the business of biopharma: how new therapies are getting from approval to adoption and how broader trends in regulation, competition, and technology are changing what it takes to succeed.

I’ll draw on over 15 years of experience in biopharmaceutical strategy, pricing, access, and evidence. Sometimes the focus will be on a single disease area or treatment class. Other times we’ll focus on broader trends playing out across the field. In all cases, my goal will be to bring analytical business thinking to this industry.

What you can expect here

We’ll cover a wide range of topics, but return to a few core themes along the way:

• Business models: How manufacturers are testing new approaches, like bundling drugs and services

• Pricing and policy: How new regulations and payer dynamics are influencing launch and lifecycle strategies

• Competition: How changes in the competitive landscape are impacting business and investment decisions

• Evidence: How new strategies for evidence generation are influencing drug coverage

• Coverage protocols: The growing role of new product blocks, formulary exclusions, and step edits in determining market success

• Technology: How new technologies like artificial intelligence and large language models are changing the way the industry operates

Nothing makes me happier than thinking about this industry and having conversations with like-minded folks. If anything here sparks a thought, I’d love to hear from you!

All the best,

John Jarvis