From Brussels to Washington: Lessons Learned From 30 Years of International Reference Pricing in Europe
Evie Cooke, MPhil; David Alderson, MBA, Cogentia Healthcare Consulting, Cambridge, England, UK
An Ambitious Pricing Reform
The United States is a major market for innovative drugs, with prices on average 2.78 times higher than in 33 other nations, according to a 2024 report.1 Some, including US President Donald Trump, argue these high prices drive global pharmaceutical innovation, with the rest of the world’s health systems getting a “free ride.”2 Overall, the United States represents approximately half of global pharma sales.3
Trump’s Most-Favored-Nation (MFN) drug pricing policy is built on a simple, politically powerful idea: the United States should not pay more than patients in other wealthy countries for the same medicines. By linking its drug prices to international benchmarks, the United States has embarked on its most ambitious federal pricing reforms yet: international reference pricing (IRP).
Europe has been implementing IRP based on publicly visible list prices for 30 years—with mixed results. But what can Americans learn from the European experience?
The evidence from Europe and the strategic responses to Trump’s MFN policy already visible from pharmaceutical executives suggest the policy’s true impact will be measured not in reduced US prices, but in launch delays or omissions in ex-US markets, market exits, and the fundamental restructuring of the pharmaceutical industry. Increasingly, confidential agreements are being negotiated when a market’s willingness to pay threshold for a drug falls below the referenced list price needed for a company to continue to supply it.
The US Experiment: What’s Actually Happening?
Trump’s MFN policy architecture encompasses 3 implementation pathways targeting high-cost drugs: the voluntary GENEROUS (GENErating cost Reductions fOr US Medicaid) model for state Medicaid programs, separate mandatory models for high-cost drugs under Medicare Parts B and D, and direct manufacturer agreements through the TrumpRx platform.
The GENEROUS model bases MFN reference prices on the second lowest country-specific manufacturer-reported net price (among 8 comparator nations), adjusted for differences in gross domestic product (GDP) per capita using a purchasing power parity method.4 The 2 additional proposed Medicare models use international drug prices to set alternative benchmarks for calculating rebates authorized by the Inflation Reduction Act, but are not tied to MFN directly.
"Most-favored-nation policy’s true impact may be measured not in reduced US prices, but in launch delays or omissions, market exits, and the fundamental restructuring of the pharmaceutical industry."
However, for the 155 million US citizens with commercial insurance who remain at the mercy of prices their insurers negotiate, any benefits from MFN policies remain at best indirect and emerging.5
In January 2026, Novartis CEO Vas Narasimhan told Bloomberg at the World Economic Forum in Davos that the policy shift represents “a pretty seismic shift in the structure of our industry,” warning that “the biggest impact is going to be on future launches. Be it delayed launches, might be no launches” across Europe, Japan, and Canada.6
By April 2026, 17 major pharmaceutical companies had signed MFN drug pricing agreements with the Trump administration.7 The TrumpRx platform went live in February 2026, with 43 products featured at launch.8
The Carrot and the Sticks of President Trump’s MFN
For drug companies that do not engage in MFN deals, there are consequences. The threat of regulatory penalties (including revocation of approvals) and 100% tariffs on their drug imports has been an incentive to secure engagement from big pharma.2,9
For those that sign deals early, beyond the President’s protection from tariffs, there is greater flexibility to shape terms, including the ability to sell directly to patients at MFN prices via the TrumpRx or company platforms; thereby preserving volume and brand presence even at lower net prices.10,11
Restating its claim that “foreign nations freeloading on American-financed innovation” (referring to countries that pay lower prices for medications and contribute lower revenues to industry innovation), the Trump administration has warned that disciplinary US trade policies will be imposed if foreign governments continue to keep pharmaceutical prices below what the administration considers fair market levels.12,13
Thus, on a global scale, MFN agreements have been leveraged to influence trade policy through the threat of tariffs.
"For the Most-Favored-Nation framework to deliver meaningful change, it would need to rely heavily on broad net price transparency. However, mandating such disclosure would be highly complex."
The emerging UK-US pharmaceutical deal neatly illustrates how international pricing dynamics can reshape domestic health technology assessment (HTA). With US policy makers adopting MFN benchmarks that explicitly reference UK prices, the United Kingdom’s historically stringent cost-effectiveness thresholds risked anchoring US reimbursement at levels industry viewed as unsustainably low.
To avoid trade retaliation, the United Kingdom has agreed to raise the National Institute for Health and Care Excellence’s (NICE) core incremental cost-effectiveness ratio range, signaling a greater willingness to pay for innovation and reducing the chance that the National Health Service prices become the de facto global floor for MFN calculations. In return, the agreement offers political and trade “mitigations” for the United Kingdom, including reassurances of tariff-free access and a lower risk that aggressive cost containment at home will translate into punitive measures or constrained access to future launches in the much larger US market.14 However, it remains unclear whether these changes will be sufficient for the United Kingdom to avoid significant impact, including launch delays.
For the MFN framework to deliver meaningful change, it would need to rely heavily on broad net price transparency. However, mandating such disclosure would be highly complex and, if fully realized, the resulting price convergence could render launches in certain markets, such as the United Kingdom, economically nonviable.
Cogentia Healthcare Consulting’s survey of 10 US market access industry experts, conducted before MFN policies were announced, showed that most participants expected the implementation of IRP in the United States to have a “somewhat negative” or “very negative” impact across 4 domains: drug launch prices, innovation, reference country prices, and administrative burden.15
Learnings From Europe
Europe is experienced with IRP, with most countries using some form of strategic IRP policies, often in conjunction with other methods such as HTAs, to align drug prices with their perceived value.16
Europe’s history in IRP gives the following learnings:
1. Transparent and predictable methods are key
Transparency in the IRP process and predictability in the basket selection and revaluation frequency can reduce uncertainty for manufacturers. For example, the Netherlands’ Medicines Pricing Act explicitly sets out the reference basket (currently Norway, Belgium, France, and the United Kingdom), the calculation method (average of reference prices), and the timetable for regular price revisions. 17,18
2. Utilize complementary strategies
European countries such as France, Italy, and Spain use a combination of both HTA and IRP methods to support pricing. The United States could potentially leverage value-based pricing analysis from the Institute for Clinical and Economic Review (ICER) alongside IRP methods to develop a more robust pricing approach, rather than relying on a single method like IRP.
3. Select an appropriate reference basket
European countries tailor reference countries to market size and economic status and regularly review reference baskets. For example, Norway limits its IRP basket to 9 countries with similar GDP, rather than referencing all EU states.19
A Global Impact
While in theory IRP promises to accelerate access and curb excessive spending, Europe’s experience shows a different story. In many IRP-exposed European markets, companies delay submitting new medicines by up to a year because they prefer to launch and establish prices in large, high-income markets first (eg, Germany, France, Italy, United Kingdom, and Spain), as early low-price launches can influence their entire global portfolio due to IRP.20-22
"Many stakeholders are worried that, once a system requires net prices to be reported for Most-Favored-Nation purposes, many launches would not be commercially viable."
To preserve room for negotiation under these constraints, manufacturers have increasingly relied on high list prices with discounts (often confidential) available to European payers.
Transposed to the United States, MFN risks exporting and amplifying these dynamics. If European list prices feed directly into US benchmarks, global manufacturers will have even stronger incentives to design launch sequences around US MFN exposure. Manufacturers would likely aim for European list prices that appear to fall within an acceptable US reference band, while pushing budget-constrained payers toward deeper confidential discounts and tighter confidentiality provisions—effectively decoupling public list prices from true transaction prices. However, as MFN evolves, the pricing anchor could be the net price.
Many stakeholders are worried that, once a system requires net prices to be reported for MFN purposes, many launches would not be commercially viable. There is the question of whether the confidentiality of commercial agreements can be shredded and how such mechanisms would be legally structured. If there is net pricing transparency globally, the result is likely to be less access to innovation for patients in less-commercially attractive markets as launches that risk the price corridor would not happen.
Some European industry leaders propose a common EU list price, paired with confidential net prices to reconcile this tension: maintain publicly visible prices that roughly align with US expectations, while safeguarding country-specific affordability behind the veil of secrecy.23 For this approach to work, there would need to be a harmonized approach to pricing across Europe, which is not currently the case.
Germany is currently having significant debates about the use of confidential prices but acknowledges the challenges of this within the constraints of the current system.24 A recent example of where this has led to European list price increases is Mounjaro (tirzepatide), whose list price was increased in the United Kingdom (by 170%) because of pressure from the US administration.25 Interestingly, the Mounjaro manufacturer applied a different launch strategy in Germany, where Mounjaro became the first drug to invoke a confidential price option, owing to their significant research and development presence in Germany as per the recently updated German Medical Research Act.26 Behind the list price increase in the United Kingdom, confidential discounts and net prices for the NHS remain in place.
For the United States, MFN may deliver short-term savings and greater price convergence with peers. But it also raises the possibility that manufacturers will strategically deprioritize or pull out of non-US launches to protect US price realizations, thereby widening global access gaps and entrenching a more US-centric innovation model.
"If Europe becomes less attractive as an early launch region and global revenues shift accordingly, pressure could paradoxically result in the need for higher US prices to compensate for diminished earnings elsewhere."
A recent example of this is Insmed’s Brinsupri (brensocatib) for non-cystic fibrosis bronchiectasis. In a May 2026 earnings call, Insmed’s Chair and CEO reiterated the need for clarity on MFN policies before launching in Europe, having previously stated in February: “we want clarity on the MFN policies that are coming forward now. I think we are going to have that in the coming weeks and, at the most, months. But until that is clear, it seems to us that the prudent thing to do is to sort of [put] things on hold until we know what that is going to look like.”27,28 This suggests that in the short-term, companies will look to delay launches in Europe while waiting for greater clarity on the impacts of MFN. In the meantime, hesitancy around European launches may inadvertently fund the Chinese biotech market.28
Over time, if Europe becomes less attractive as an early launch region and global revenues shift accordingly, pressure could paradoxically result in the need for higher US prices to compensate for diminished earnings elsewhere—undermining MFN’s original promise.15,22 While reducing drug costs is an important goal, some argue that linking US prices to those abroad is a blunt instrument that risks doing more harm than good overall and will not achieve the stated goal. Reference pricing, by definition, can be done only when other markets have the product in question.
Perhaps a more sustainable approach would be to reinforce domestic HTA to evaluate a drug’s effectiveness compared with existing alternatives, and to move towards more value-based pricing. Rather than referencing prices set abroad, the United States could ground its pricing decisions in transparent assessments of clinical benefit and cost-effectiveness that align with national priorities and societal willingness to pay.20
References
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