External price referencing is re-entering the US debate, but its implications extend far beyond policy mechanics. Most Favored Nation (MFN) proposals can directly link US and ex-US drug prices, creating new cross-market risks that directly affect US revenue. For pharma leaders, it can serve as a catalyst to stress test global pricing governance across list, net, and realized metrics.
MFN policy: The current state of play
Most Favored Nation pricing seeks to link US drug prices to those in other developed countries, using both list and net price benchmarks. Even as design specifics and legal and political uncertainty remain, US drug pricing is increasingly exposed to international price levels and net price dynamics. Recent policy discussions signal renewed momentum around external price referencing for US drug cost containment, increasing the strategic importance of global pricing interdependencies.
Why global, multi-metric price governance is no longer optional
Discussion of MFN pricing in the US is often framed as a policy issue. For pharmaceutical companies, MFN also serves as a powerful stress test, revealing the strength, or fragility, of global pricing governance and price management maturity.
Despite uncertainty around design details and enforcement mechanisms, the strategic implication is clear: pricing decisions across markets are becoming more tightly interconnected. Historically, many companies have governed US and ex-US pricing independently, with limited consideration of cross-market price interdependencies beyond traditional International Reference Pricing (IRP) mechanics – an approach that is increasingly misaligned with today’s pricing reality.
Companies that maintain regionally siloed pricing oversight or focus narrowly on list prices instead of also on net prices materially increase their risk of revenue erosion and strategic inflexibility.
MFN fundamentally changes the nature of pricing risk
MFN introduces a direct linkage between US and ex-US pricing, but the mechanics differ by model. Under GENEROUS (GENErating cost Reductions fOr U.S. Medicaid), US Medicaid prices are benchmarked against manufacturer-reported, auditable ex-US net prices. By contrast, GLOBE (Global Benchmark for Efficient Drug Pricing) and GUARD (Guarding US Medicare Against Rising Drug Costs) benchmark US Medicare prices against ex-US list ex-manufacturer prices by default. Alternative approaches consider a benchmark set as the higher of (i) the lowest observable ex-US list price and (ii) the average of manufacturer-submitted ex-US net prices, adjusted for GDP (PPP).
While the exact mechanics continue to evolve, MFN reinforces a long-emerging structural reality: for new product launches, US launch pricing strategies are increasingly influenced by ex-US price planning. For in-market products, ex-US pricing actions can directly impact US net prices and revenues.
This dynamic marks a turning point, forcing a reassessment of global pricing balance. With US drug prices facing pressure from international benchmarking, ex-US prices may need to move upward to sustain global value. As US pricing strategy typically sets the global direction, achieving this rebalancing requires far tighter coordination across US and ex-US price planning, execution, and governance than most organizations have today.
Three implications stand out:
Ex-US prices are no longer “local” decisions
Price levels, discounts, and contract structures in one market can directly or indirectly impact or constrain realized US net prices. For example, a deep discount granted in a single European market can end up lowering the benchmark used for US pricing – directly impacting the realized US price under MFN.
Net prices matter as much as list prices
MFN exposure also depends on realized net prices, in particular under GENEROUS, and cannot be assessed on published list prices alone. A market that appears protected due to a high list price can become an MFN risk driver once discounts and rebates materially lower the net price.
Coordination and timing become critical
Launch sequencing, price revisions, and contract renegotiations require tighter global orchestration. For example, adjusting the timing or sequencing of ex-US launches to manage global price corridors and US exposure becomes a deliberate global governance decision rather than a regional optimization.
Importantly, MFN introduces a fundamentally new dynamic into global pricing. By explicitly linking US and ex-US price levels, it creates cross-market dependencies that historically did not exist - placing unprecedented strain on governance models built for largely independent systems.
Taken together, these dynamics expose a clear gap between how pricing risk is now created under MFN and how pricing governance is structured in most organizations today.
Why many pricing governance models fall short
Across the industry, MFN exposes three structural weaknesses in prevailing pricing governance models.
Fragmented US vs. ex-US governance
Pricing governance is often split between US payer-driven processes and ex-US list- and IRP-focused structures. Under MFN, this separation breaks down. Ex-US decisions can directly impact US price opportunities, yet escalation paths and decision rights frequently remain disconnected. A unified global pricing governance model spanning US and ex-US markets and anchored in clear global and regional price guardrails with country-specific guidance and case-by-case escalation is now essential.
Over-reliance on list price management
Many pricing governance frameworks remain centered on list price approvals and launch pricing. In an MFN environment, this approach is fundamentally inadequate. MFN exposure is driven by realized net prices, rebates, and contract structures – not by list prices alone. Governance that does not actively manage the full net price waterfall creates an illusion of control and leaves organizations vulnerable to MFN-driven revenue erosion. This risk is amplified in markets where confidential national or local rebates, clawbacks, or managed-entry agreements drive realized net prices far below list.
Governance defined, but not enforced
Standard Operating Procedures (SOPs), committees, and pricing principles often exist on paper, but are not consistently translated into enforceable thresholds, escalation logic, and operational workflows across markets. MFN reduces tolerance for ambiguity; governance that is not enforceable fails precisely when pressure increases. When escalation depends on “best judgment” rather than predefined triggers, decisions slow down exactly when speed and cross-market coordination matter most.
What MFN-ready price governance looks like
MFN does not demand a complete reinvention of pricing governance, but it does require a substantial evolution from how most organizations manage prices today. In practice, this means raising governance maturity across four critical dimensions.
A truly global governance lens
MFN-ready organizations manage pricing governance as a single global system. Decision rights are clearly defined, cross-market trade-offs are explicitly assessed, and escalation is triggered by risk, not geography. For example, a low-volume country can trigger global escalation if its net price materially shifts the MFN benchmark.
This often includes establishing a dedicated cross-market MFN/IRP steering committee spanning US and ex-US leadership, accountable for price decisions with potential US impact. Such forums operate within explicit price corridors and escalation thresholds, and provide structured guidance on how local pricing arrangements – such as confidential, outcomes-based, or volume-tiered agreements – should be assessed in a global context.
Multi-metric price management
Effective governance actively manages list and net prices, floors and targets, and realized price metrics across markets. Companies that govern only one metric will miss the true economic signal – particularly under MFN, where exposure depends on how different price layers interact. Leading organizations therefore complement clear price metrics and guardrails with robust price databases, integrated IRP logic, and advanced analytics that make cross-country dependencies transparent and decisions relevant. This requires tracking movements across the full price waterfall, simulating IRP and MFN spill-over effects, and using workflow-embedded analytics to flag risks before local decisions are executed.
In practice, such capabilities are increasingly supported by dedicated price management systems – such as Simon-Kucher’s LS Genius | Price Manager – which combine a single source of truth for global pricing data with built-in governance workflows and analytics to enable structured, multi-metric price steering at scale.
Risk-based processes and escalation workflows
Not all price decisions warrant the same level of scrutiny. Leading models differentiate by product importance, lifecycle stage, and market risk, translating into clear price corridors, approval thresholds, and fast escalation paths. This allows high-risk changes to move quickly to senior decision makers, while low-risk changes remain decentralized.
Successful organizations increasingly embed formal prioritization and review checkpoints (e.g., EU prioritization gate) into pricing and launch SOPs, particularly for ex-US markets with high relevance for MFN benchmarking. These checkpoints assess planned net prices, contractual structures, and anticipated price evolution against defined global corridors, with quantified US exposure informing timely escalation where needed.
SOPs that drive consistent behavior
Effective governance SOPs standardize price definitions, assign clear responsibilities, define escalation triggers, and create an auditable trail of decisions. Under MFN, this level of structural rigor and execution becomes essential.
In more advanced governance models, MFN considerations are also integrated earlier into lifecycle and access planning processes. This aligns pricing strategies, managed-entry terms, and regulatory submissions with global governance principles while remaining compliant with local access and policy requirements.
Large pharma vs. biotech: Different starting points, same direction
MFN affects companies differently depending on scale and maturity.
- Large pharma typically faces complexity and legacy fragmentation. The priority is to simplify, standardize, and reconnect existing governance structures into a coherent global model.
- Biotech and emerging pharma may lack formal governance structures but have the advantage of starting clean. The priority is to design scalable governance early, especially around net price management and escalation logic.
Different starting points, but the same conclusion: the future of price governance must be global, explicit, and enforceable.
Technology as an enabler, not a shortcut
The governance model and operating structure described above cannot be sustained through manual processes alone. MFN increases the cost of manual, spreadsheet-based price management. Top organizations pair governance with integrated price management systems that centralize data and embed workflow-based approvals.
Software follows strategy. Digitizing weak governance that is not future proof only accelerates poor decisions.
The real test of pricing governance – are you ready?
MFN may evolve or stall, but tighter global price linkage is here to stay. As a stress test, MFN exposes whether pricing governance is truly global, multi-metric, and enforceable – or merely well-intentioned on paper.
From our work with global pharma leaders, we know that MFN separates organizations with mature, enforceable pricing governance from those still managing by exception. Companies that use MFN to strengthen and redesign global pricing governance will be better positioned to protect revenue and strategic flexibility.
To discuss how you can realign your price governance model to meet MFN-led shifts in the industry, reach out to our experts.
