Drug pricing policy continues to evolve—and with it, new models and proposals surface that may impact reimbursement, patient access, and provider operations. One model that continues to shape the national dialogue is the Most Favored Nation (MFN) model.

While the MFN policy is not currently in effect, it introduced a pricing framework that has influenced federal drug pricing reform efforts—including some provisions in the Inflation Reduction Act (IRA). If you’re unfamiliar with the model or want a clearer understanding of its potential implications, this overview is designed to provide a concise, objective summary.

What Is the Most Favored Nation (MFN) Model?

The MFN model was introduced in 2020 as a federal drug pricing initiative intended to lower Medicare Part D drug spending. Under this approach, Medicare would no longer pay the average sales price for certain high-cost drugs. Instead, it would adopt a pricing benchmark based on the lowest price paid by other economically developed countries for the same medications.

The goal of the MFN model was to bring U.S. drug prices in line with global standards by using international reference pricing to determine reimbursement.

Why Was It Controversial?

Shortly after it was finalized, the MFN rule faced strong opposition from providers, patient advocacy groups, and pharmaceutical manufacturers. The main concerns included:

• Lack of a proper comment period before implementation
• Potential access issues for patients if providers could not afford to offer drugs reimbursed below acquisition cost
• The potential destabilization of Medicare Part D reimbursement structures

Legal challenges quickly followed, and implementation was paused by court order. In 2021, the Biden administration officially withdrew the MFN interim final rule.

Why It Still Matters

Although the MFN model was never implemented, the concept of international reference pricing remains highly relevant. The IRA includes drug price negotiation mechanisms that draw on similar principles—leveraging federal purchasing power to reduce the cost of select high-expenditure drugs under Medicare.

Additionally, policymakers continue to explore cost-containment models that may incorporate international pricing comparisons, particularly as healthcare spending and drug prices remain in the spotlight.

How MFN-Like Policies Could Impact 340B Covered Entities

While the MFN model is not directly tied to the 340B program, any significant shift in Medicare drug reimbursement or pricing structures can have ripple effects:

• Reimbursement pressure: If acquisition costs remain high but reimbursement rates are capped, 340B-covered entities may see reduced margins on certain drugs.
• Manufacturer response: Broader pricing reforms may lead drug manufacturers to adopt more restrictive policies—including limiting access to 340B discounts or modifying their distribution models.
• Operational complexity: As pricing rules evolve, covered entities may need to adapt billing processes, pricing systems, and data reporting to remain aligned with both 340B compliance and payer expectations.

At RxTrail, we help covered entities stay ahead of policy changes that impact 340B performance, even if they are not directly tied to 340B. If you have questions about the potential impact of drug pricing reforms on your program, we’re here to help.

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