Pursuing Affordability While Supporting Innovation: Walking the Drug-Pricing Tightrope

Prescription drug prices and national priorities vary widely across the globe, leaving patients with uneven access to potentially life-changing treatments. How can health economics and outcomes research (HEOR) help healthcare stakeholders negotiate lower costs for countries and households without compromising pharmaceutical innovation?

By Beth Fand Incollingo

The power of pharmaceutical innovation is nothing short of awe-inspiring, and it goes without saying that patients across the globe want access to the latest treatments, preventive measures, or cures for disease.

But the intricate push and pull of healthcare economics—often driven by health policy—generates divergent prices for the same drugs depending on where in the world a patient lives, and that means access to these treatments is far from balanced.

In addition to having different standards of value that dictate which drugs confer enough benefit to fund—and at what price—national healthcare systems are constrained by budgets that force difficult choices about adding expensive new technologies to their formularies. Across the European Union’s 27 member states, for example, the annual percentage of approved new drugs to actually reach patients has dropped as the wait time for government reimbursement has grown.¹

While large, affluent countries like Germany and France tend to reimburse for a broad variety of new drugs, markets in middle-income countries are more likely to support reimbursement for just half of the new products receiving regulatory approval, with the most expensive drugs remaining out of reach, said Jens Grueger, PhD, a Senior Advisor to Curta and Boston Consulting Group, health economics and drug pricing policy consulting firms.

“What does it mean for patients if their needs are not met by reimbursement coverage? If a prescribed drug can be obtained in a country but isn’t covered, patients will have to pay full price,” said Grueger, who is based in Germany and is a Past President of ISPOR and an Affiliate Professor of Health Economics and Drug Pricing at the University of Washington. “If the drug is an expensive cancer therapy, that means these patients probably can’t access it.”

The trickiest dance in global drug pricing may be lowering costs for health systems and households without either decimating the revenues that support pharmaceutical innovation or further reducing patient access to drugs. It will be up to HEOR professionals to help policy makers and other healthcare stakeholders devise and refine strategies for increased affordability while offering drug developers opportunities for their treatments to enter markets, reach patients at significant volumes and speeds, and remain available long-term.

The most meaningful solutions will come from global, multidisciplinary cooperation, something HEOR experts are uniquely positioned to drive, said Caroline Solon, Vice President of Market Access Strategy for Lumanity, a global consulting firm that helps pharmaceutical and biotechnology companies price and launch treatments.

“The struggle with drug costs has been going on for a very long time, and it’s only going to get worse, given the rise in advances such as personalized medicines and gene therapies, which have very high upfront costs,” said Solon, who is based in London. “Everyone needs to be ready to come to the table with a common goal of identifying practical, tangible solutions and making concessions to optimize patient care. If not now, when?”

International Reference Pricing: A Key Strategy

For decades, international reference pricing (IRP), which includes strategies such as most-favored-nation (MFN) pricing, has been a key factor in determining how much countries pay for drugs.

Under IRP, pharmaceutical companies negotiate with selected high-income countries to establish mutually acceptable prices. Then, those prices are used as comparators to help determine what peer nations—and, later in the game, low- and middle-income countries—will pay for the same medications.

Although list prices for drugs are shared publicly, some negotiated prices are not. If pressured to increase transparency, companies may choose to delay or halt drug launches instead, so their negotiated lower prices can’t be used as comparators. This results in even longer waits and fewer options for patients, especially in low- and middle-income countries (LMICs).

“If a prescribed drug can be obtained in a country but isn’t covered, patients will have to pay full price. If the drug is an expensive cancer therapy, that means patients probably can’t access it.” — Jens Grueger, PhD

“This pricing approach has not been shown to improve affordability across countries and may instead exacerbate disparities, particularly in LMICs,” said Mouna Jameleddine, PharmD, MSc, Director of Health Technology Assessment (HTA) for Tunisia’s National Authority for Assessment and Accreditation in Healthcare and Past President of the ISPOR HTA Roundtable for Middle East and Africa. “This highlights the need for a structured and transparent approach to differential pricing. Aligning prices with countries’ ability to pay, often proxied by gross domestic product per capita, could improve affordability and access in LMICs. In the absence of such a framework, current pricing dynamics may generate unintended cross-country effects that complicate access.”

A new twist in the existing dynamic arose in May 2025, when the United States announced it would begin demanding MFN pricing for certain drugs.² The initiative has grown to include 3 policy strategies that lower the prices of specific drug types covered by Medicare or Medicaid to MFN levels through manufacturer rebates. The government has also struck agreements with 17 pharmaceutical companies to lower their prices for certain key drugs, in many cases through direct-to-consumer sales on the website TrumpRx.³

President Donald Trump says the new policy direction is fair, as Americans have been paying list prices 3 to 4 times higher than the amounts shouldered by their peers in other high-income countries, essentially subsidizing discounts for those nations.⁴ But some HEOR experts believe the initiatives will reduce pharmaceutical innovation, limit marketing of the treatments in both LMICs and high-income nations, or both.

Solon also highlighted a potential issue with America’s onshore manufacturing requirements for drug developers involved in its MFN programs,⁵ saying those measures will increase pharmaceutical production costs which, typically, leads to higher prices.

“If you ask anyone in our field what keeps them up at night, it’s how the United States will perform as a pricing manager in these situations,” Grueger said.

Changes in the United States Spark Changes Across the World

In Western Europe, drug comparator prices have historically been established in higher-priced markets such as Germany, with lower prices struck in France; other relatively affluent countries have typically paid amounts between those numbers. But now that the United States is participating, the sheer size of its market will mean that reference pricing must begin there, and that presents some problems, Grueger said.

President Donald Trump says the new policy direction is fair, as Americans have been paying list prices 3 to 4 times higher than the amounts shouldered by their peers in other high-income countries.

Brand-name drug prices have often been highest in the United States because the market is large, regulatory approvals are relatively swift, and there’s an expectation that the newest and best technologies will be made available, he said. But if prices for new drugs are established in America first, developers may find it challenging to set reasonable and comparable prices for the same products in other countries, and to sell them in sufficient volumes to make the effort worthwhile. Conversely, setting initial reference prices in Europe might lower US prices beyond what pharmaceutical companies are willing to bear.

Key healthcare systems are already reacting to that uncertainty. According to one global data analysis, in the 10 months following the Trump administration’s executive order demanding MFN status, the number of new products launched in Europe declined by 35%.⁶ Comments from industry executives suggest that companies are delaying launches until they have more clarity on what MFN-driven pricing in Europe will look like.⁷

“It’s not that we had fewer products approved by the European Commission, or that 35% fewer products will ever reach the markets,” Grueger said. “It just indicates that companies are much more inflexible now with their prices, because they’re concerned about the implications these prices might have for the United States.”

The analysis also found an increase in the number of products withdrawn from European markets during the same 10-month period and blamed it, in part, on Trump’s call for MFN status in America.

The changing reference pricing dynamics may limit new indications for existing drugs, too. Added indications may launch at prices so low that companies will question whether to roll them out in smaller nations.

These changing IRP dynamics may limit new indications for existing drugs, too. If swept up in America’s MFN programs, added indications may launch at prices so low that companies will question whether to roll them out in smaller nations, Grueger said.

The European Commission, however, is fighting for continued commercialization in its member countries. In a recent pharmaceutical directive expected to be finalized by the end of this year, it threatened to remove market protection from new indications if companies take longer than 3 years to respond to a member nation’s access request.⁸

Developers may also buck the system by altering their drugs slightly for each market so the prices of the products can’t be compared, suggested Michael E. Chernew, PhD, the Leonard D. Schaeffer Professor of Health Care Policy at Harvard Medical School.

“They might offer a different formulation, dosage, or package size in one country compared with another,” he said, “depending on how the regulations address that.”

The Role of Value-Based Pricing

But where do the prices used in IRP mechanisms come from?

Most high-income countries use value-based pricing to negotiate with pharmaceutical companies, meaning that they decide what they’re willing to pay based on their assessments of the health outcomes associated with a drug.

The United Kingdom employs the quality-adjusted life year (QALY) as the key measurement in its HTA process, considering a drug cost-effective if its price per QALY gained falls below a certain threshold. Germany focuses instead on comparative effectiveness, probing how much benefit a new drug is expected to bring compared with treatments already on the market.

“The key to sustainable pricing policy that enables patient access today, but also incentivizes future research and development, is recognizing and rewarding innovation in very high unmet-need areas rather than ‘me-too’ products,” Solon said. “Of the approaches used today, I think the German HTA process is a good example of assessing and rewarding incremental value.”

While comparative effectiveness analyses sometimes lead to higher prices in Germany for the most groundbreaking drugs compared with other EU member states, the United Kingdom’s approach results in a more controlled range of prices that, overall, sit at the low end of the spectrum represented by its peer countries, Grueger said.

Yet, lower IRP pricing in high-income countries can pull comparator prices down, threatening innovation. To encourage Britain to take on more responsibility for supporting innovation, the United States recently signed a trade agreement with the country encouraging it to raise its price threshold.⁹

Under the agreement, the United Kingdom agreed to raise its cost-effectiveness threshold from £20,000 to £30,000 per QALY to £25,000 to £35,000 per QALY, ultimately paying a premium of up to 25% more for similarly valued new medicines starting in April 2026. In return, the country will be allowed to import medicines into the United States tariff-free for 3 years.

“The key to sustainable pricing policy that enables patient access today, but also incentivizes future research and development, is recognizing and rewarding innovation in very high unmet-need areas rather than ‘me-too’ products.” — Caroline Solon

Value-based pricing can also mean that countries approve expensive drugs with the caveat that their health systems will pay manufacturers in full only if the treatments bring promised health outcomes.

“Conceptually, this is very appealing, but from an operational perspective, the agreements often are not feasible to complete,” Solon said. “To make them a better option, public health systems require enhanced digital, data, and staffing infrastructures so they can more readily track patient health outcomes long-term.”

Although there have been examples in Europe where the administrative burden of an outcomes-based agreement ultimately became a barrier to commercialization, Solon said, there have also been examples demonstrating more success with outcomes-based and managed-entry agreements.^10-12

Jameleddine pointed out that many LMICs have not fully developed value-based pricing or HTA systems but could benefit from starting small and combining those processes with other pricing policies and direct manufacturer negotiations.

“Value-based pricing, within the framework of HTA, can be used as a tool for structuring our discussions around evidence-based data on effectiveness, clinical benefit, and economic impact,” she said. “Even a partial application can contribute to a transparent and multidisciplinary evaluation of what matters most to patients.”

Should the United States Adopt Value-Based Pricing?

Although IRP is typically based on value judgements, the United States has long rejected the idea of a value-based nationwide drug-pricing approach.

In Chernew’s opinion, that stance is reasonable, as long as the government generally treats value decisions as price caps rather than floors and supports National Institutes of Health-funded research into the clinical effectiveness of drugs.

“We should work to avoid paying for drugs whose clinical benefit doesn’t justify the cost, but I don’t think we necessarily need to have a full-blown value process for every new drug,” he said. “I think we might have too much administrative burden in running that.”

Grueger, however, believes that value-based principles would lower drug prices in America by tying costs to clinical benefit,¹³ and Solon thinks the country’s healthcare system requires more comprehensive reform.

“Without fundamental health system reform, the individual and very specific policies being attempted now are probably not going to have a huge upside for patients,” she said. “Drug prices are the easy targets, but that’s often not what’s driving healthcare costs in the United States.”

Pursuing Additional Solutions

To ease the tension between pharmaceutical affordability and innovation, healthcare stakeholders will need to work with HEOR professionals to explore additional solutions.

In privatized health systems, strategies that can save money for patients include rebates and out-of-pocket caps. In the United States, these concepts are at the heart of recent legislation encouraging pharmacy benefit managers to maximize affordability for their customers, and of the Inflation Reduction Act (IRA) of 2022, which is intended to lower patient and government costs for prescription drugs.^14,15

Under the IRA, an annual out-of-pocket spending cap (starting at $2000 per person and adjusted annually for inflation) on drugs covered under Medicare Part D is expected to improve treatment adherence, Solon said.¹⁶ She’s less certain that IRA negotiations establishing “maximum fair prices” for certain Medicare-covered drugs will make a difference.

“A lot of the negotiated drugs were already highly rebated,” she said, “so this may not have a substantial impact on patient access or affordability.”

Next, Chernew suggests that America boost competition by expediting the introduction of biosimilars and bundling similar drugs within single billing and reimbursement codes. He also favors streamlining drug development; hitting companies with market penalties if they don’t complete trials after receiving accelerated drug approvals; and restructuring the federal 340B drug discount program so that savings go directly to underserved patients, rather than to the safety-net hospitals and clinics that treat them.

“Value-based pricing, within the framework of health technology assessment, can be used as a tool for structuring our discussions around evidence-based data on effectiveness, clinical benefit, and economic impact.” — Mouna Jameleddine, PharmD, MSc

Globally, Jameleddine anticipates that money increasingly will be saved through cross-market collaborations, such as the regional or inter-country pooled procurement mechanisms allowing countries to access essential medicines at prices that would be difficult to achieve through fragmented procurement. Examples include the Beneluxa Initiative on Pharmaceutical Policy, the Pan American Health Organization Strategic Fund, and the Gulf Cooperation Council Health Council.

“Even at the national level, unified procurement mechanisms can ensure that we are negotiating better prices for bigger volumes,” she said. For example, South Africa provides antiretrovirals and other medications through a centralized tendering, or pharmaceutical bidding, system, which spurred a 40% average drop in drug prices between 2003 and 2016.¹⁷

In LMICs, private investors are becoming a new type of stakeholder in the introduction of new medicines, Solon said. Through vaccine, social impact, or development impact bonds, these investors can make a profit—and a difference—by ensuring quick access to medicines while allowing governments time to budget for those expenses.¹⁸

In addition to supporting the timely introduction of generic medicines and biosimilars in LMICs, Jameleddine advocates for strengthening local manufacturing capacities, particularly for biosimilars. Expanding domestic production can ensure supply security, enhance competition, improve market dynamics, and potentially create greater fiscal space for the adoption of other innovative therapies.

For their part, manufacturers can support affordability by offering national installment plans or volume-based agreements, under which they must provide rebates if their treatments cost a country more than a predetermined, value-based amount.

In the big picture, Solon said, good patient care will depend on stakeholders moving away from a one-size-fits-all approach to drug pricing and using context and nuance to meet countries where they are. HEOR professionals can support that goal, she said, by clearly communicating why data translate into value, conducting relevant and execution-ready studies, and evolving their methodologies to match the pace of innovation.

Ultimately, she said, that work should focus on getting as many life-changing drugs to patients as possible, no matter where they live.

“Healthcare is very much a right,” Solon said. “It shouldn’t be a privilege, and it shouldn’t be reserved only for wealthier countries.”

References

1. European Federation of Pharmaceutical Industries and Associations. Patients in Europe waiting longer for new medicines as inequality grows between Member States. https://www.efpia.eu/news-events/the-efpia-view/statements-press-releases/ patients-in-europe-waiting-longer-for-new-medicines-as-inequality-grows-between-member-states/. Published May 19, 2026. Accessed May 31, 2026.

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3. The White House. Fact Sheet: President Donald J. Trump Announces Deal with Regeneron to Bring Most-Favored-Nation Pricing to American Patients. https://www.whitehouse.gov/fact-sheets/2026/04/fact-sheet-president-donald-j-trump-announces-deal-with-regeneron-to-bring-most-favored-nation-pricing-to-american-patients/. Published April 23, 2026. Accessed May 31, 2026.

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11. Trotta F, Guerrizio MA, Di Filippo A, Cangini A. Financial outcomes of managed entry agreements for pharmaceuticals in Italy. JAMA Health Forum. 2023;4(12):e234611. doi: 10.1001/jamahealthforum.2023.4611.

12. European Commission. State of Health in the EU: Italy Country Health Profile 2025. Page 22. https://www.oecd.org/content/dam/oecd/en/publications/reports/2025/12/country-health-profile-2025-country-notes_7e72146d/italy_1a019ab7/2b5e1270-en.pdf. Published December 11, 2025. Accessed May 14, 2026.

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14. McCrear S. PBM reforms signed into law, reshaping Medicare Part D drug pricing transparency. AJMC. https://www.ajmc.com/view/pbm-reforms-signed-into-law-reshaping-medicare-part-d-drug-pricing-transparency. Published February 3, 3026. Accessed May 14, 2026.

15. Cubanski J, Neuman T, Freed M. Explaining the prescription drug provisions in the Inflation Reduction Act. KFF. https://www.kff.org/medicare/explaining-the-prescription-drug-provisions-in-the-inflation-reduction-act/. Published January 24, 2023. Accessed May 14, 2026.

16. Grossi G. IRA Drug Provisions Linked to Significant Drop in Medicare Medication Nonadherence. AJMC. https://www.ajmc.com/view/ira-drug-provisions-linked-to-significant-drop-in-medicare-medication-nonadherence. Published March 25, 2026. Accessed May 31, 2026.

17. Wouters OJ, Sandberg DM, Pillay A, Kanavos P. The impact of pharmaceutical tendering on prices and market concentration in South Africa over a 14-year period. Soc Sci Med. 2019;220:362-370. doi: 10.1016/j.socscimed.2018.11.029

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