Basics

In many countries, governments are the primary or sole purchasers of drugs. As such, drug prices are largely determined by a government-negotiated price. Governments in these countries may be the only healthcare payers, and thus retain the ability to dictate the prices of medicines as a condition of drug market access and coverage. Traditionally, the United States has relied on pricing dictated by free market forces. The United States government is not the only purchaser of drugs, with the private sector making up a majority. As a result, the government has considerably less influence on the price of drugs in the United States. Some, however, have suggested changing our drug pricing system to a form of International Reference Pricing known as Most Favored Nation (MFN), where drug prices would be set based on the lowest amount paid by other countries with a Gross Domestic Product comparable to that of the United States. This basic explains the framework behind MFN for drug pricing, current regulations and legislation, and the current landscape regarding the policy.