Outgoing U.S. Administration Adopts Most Favoured Nation Payment Model for Medicines
On 20 November 2020, U.S. Department of Health and Human Services Secretary Alex Azar announced the creation of a medicine payment model that would reduce the price of specific medicines in the United States to the level of the lowest price for similar medicines in comparison countries (see, attached press release). The model, now dubbed Most Favoured Nation (MFN) Model, follows a plan (see, Van Bael & Bellis Life Sciences News Alert of 14 May 2018) and a series of Executive Orders of the U.S. President to bring medicine prices down for U.S. patients while terminating what the President has repeatedly referred to as “foreign freeriding” (see, Van Bael & Bellis Life Sciences News Alert of 15 September 2020 for a discussion of the most recent Executive Order on the subject).
The MFN Model will operate for seven years and will apply to 50 medicines, including biological products, with the highest what is known as “Medicare Part B spending”. This refers, broadly, to medicines provided in physicians’ offices and hospital outpatient departments. Participating entities will receive the model payment for these 50 medicines rather than their current average sales price plus a 6 percent add-on. The model payment will encompass two parts: (i) an amount based on the lowest price in comparison countries blended with the average sales price; and (ii) a flat add-on. The formula for blending in the foreign price in part (i) will evolve as a function of the development of U.S. prices. The model also includes protections for beneficiaries (such as a continued choice of providers and treatments) and a financial hardship type of protection for specific MFN participants. Details of the MFN Model can be found in the attached fact sheet.
The MFN Model will form the subject of a 60-day public consultation. It comes at a peculiar time given the impending change of administration. Still, it is a reminder of the reality that U.S. medicine prices are the highest in the world and that some form of international reference pricing may end up being employed in the U.S. as well.