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Most Favored Nation (MFN) Rule

A proposed policy tying U.S. Medicare drug payments to the lowest prices paid by other wealthy countries, attempted under the Trump administration in 2020 and withdrawn in 2021.

How It Works

The Most Favored Nation (MFN) model was published as a CMS interim final rule on November 27, 2020, under Trump-era Executive Order 13948. The rule would have pegged Medicare Part B payment for the 50 highest-cost physician-administered drugs to the lowest per-capita GDP-adjusted price paid in a reference basket of OECD countries (including the UK, France, Germany, Japan, Canada, and others). CMS estimated $85 billion in savings over seven years. The pharmaceutical industry filed five federal lawsuits within weeks of publication; the U.S. Chamber of Commerce, PhRMA, BIO, and several manufacturers obtained preliminary injunctions on procedural grounds (APA notice-and-comment violations, primarily) in late December 2020 and early January 2021. The Biden administration rescinded the MFN rule in December 2021, partially replacing it with the more surgical IRA drug negotiation program signed into law in August 2022. MFN reemerged politically in 2025 with a new Trump administration executive order directing HHS to pursue international reference pricing. The core policy debate over MFN turns on whether U.S. drug spending should be tied to prices in countries with government price controls: proponents note the U.S. pays 2-3x more for brand drugs than any other wealthy country (RAND 2024 study); opponents argue U.S. prices fund global pharmaceutical R&D and that reference pricing would reduce innovation. The IRA's negotiated pricing approach sets U.S.-specific maximum fair prices without direct reference to foreign prices, though foreign prices are one factor CMS can consider.

Related Terms

  • IRA Medicare Drug Negotiation, The process under the Inflation Reduction Act where CMS negotiates a "maximum fair price" directly with manufacturers for selected high-cost Medicare drugs.
  • Inflation Reduction Act (IRA), A 2022 federal law that, for the first time, allows Medicare to negotiate prices directly with drug manufacturers for select high-cost medications and creates new inflation rebate and Part D redesign provisions.
  • Medicare Part D, The prescription drug benefit within Medicare, covering outpatient medications for 50+ million Americans aged 65+ and those with disabilities.

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About This Definition

This definition is part of the DrugPrice Drug Pricing Glossary, 49 terms explaining how prescription drug pricing works in the United States. All definitions are written in plain language for patients, caregivers, journalists, and healthcare professionals.

this entity is one of the U.S. Medicare prescription-drug pricing concepts that recurs across this site. The definition above is the technical answer; the paragraphs below add the practical context for how the concept connects to the CMS Medicare Part D Drug Spending data data behind every per-entity page on the site.

In the CMS Medicare Part D Drug Spending data data, this concept shapes one or more of the fields that drive the per-entity grades and rankings on this site. The methodology page describes which fields feed into which output; this glossary entry documents the underlying term.

Source: CMS Medicare Part D Spending, 2026.