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The Pharmaceutical Research and Manufacturers of America (PhRMA) represents the country’s leading innovative biopharmaceutical research companies, which are laser focused on developing innovative medicines that transform lives and create a healthier world. Together, we are fighting for solutions to ensure patients can access and afford medicines that prevent, treat and cure disease. Over the last decade, PhRMA member companies have invested more than $850 billion in the search for new treatments and cures, and they support nearly five million jobs in the United States.
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This op-ed first appeared in STAT+ on June 26, 2025.
‘Most-favored nation’ policy isn’t the way to lower drug prices
By Stephen J. Ubl, President and CEO of PhRMA
President Trump is right that Americans often pay too much for prescription drugs, and that foreign countries aren’t pulling their weight. The status quo isn’t merely unfair – it’s unsustainable.
But to fix the problem – without deterring the massive research investments that spur economic growth, job creation and health gains – policymakers will need to address the true drivers of high prices here at home, while simultaneously pressing our allies to contribute more abroad.
Our leaders can start by tackling the bloated middle of the drug supply chain. Middlemen who neither invent nor administer medicines to patients now collect more in rebates, discounts, and fees than the total price of drugs in many other countries.
Consider how pharmacy benefit managers collect $257, on average, on the cost of a 30-day prescription of one leading diabetes treatment, according to a recent analysis. That same prescription costs less than $50 in the United Kingdom, $38 in Japan, and $35 in France.
No other developed country tolerates middlemen collecting so much money from the health care system while providing so little value to patients. PBMs alone receive 42 cents of every dollar spent on medicines in the commercial market, according to Nephron Research.
PBMs are not the only ones profiting from America’s byzantine drug pricing system. In 2023, hospitals, clinics, and their for-profit partners collected nearly $65 billion in revenue from the sale of medicines through the 340B hospital markup program. Congress created the program over three decades ago to help low-income and uninsured patients afford medicines, but there is no evidence that patients are benefiting.
The 340B program has ballooned in scope. The program was originally intended to help 100 hospitals, but now approximately 3,000 hospitals participate, contracting with over 33,000 pharmacies nationwide. Many of those pharmacies are operated by for-profit chains that are financially affiliated with the country’s largest PBMs: CVS Health, Express Scripts, and OptumRx. This deepens vertical integration that disproportionately benefits corporate entities over patients and community-based providers.
Because there is no transparency or guardrails for how hospitals use the profits they make from the 340B program, the money isn’t going toward helping patients. Instead, hospitals use the program to boost their profits and their affiliates’ profits. They buy medicines for as little as a penny and mark them up by thousands of dollars – vastly higher than the prices charged for the same medications overseas.
These profit incentives distort care, leading hospitals to favor higher-priced, higher-margin medicines, which can raise patients’ out-of-pocket costs and premiums. At the same time, 340B has fueled a wave of consolidation as large hospital systems acquire smaller providers to expand their reach – pushing more care into higher-cost settings and reducing competition.
Not only is the 340B hospital markup program driving up costs for patients and employers – it’s costing the government billions. The program is now the second-largest prescription drug program in the United States, larger than Medicaid and Medicare Part B. The 340B program’s staggering growth costs the government billions each year by shifting income from tax-paying drug manufacturers to tax-exempt hospitals. That shift significantly reduces government tax revenue – widening budget gaps and straining funding for public services.
All told, PBMs, insurers, hospitals, and others now siphon off 50 cents of every $1 spent on brand medicines.
Policymakers recognize the system is broken and are advancing reforms to fix it. Those reforms include boosting transparency into how PBMs operate and profit, delinking their compensation from the price of medicines, and ensuring that negotiated savings are passed through to patients at the pharmacy counter.
On the hospital side, lawmakers are also exploring potential reforms. Congress should require transparency on how hospitals and clinics use 340B savings to benefit low-income and uninsured individuals, refocus eligibility so that only true safety-net providers participate, and establish stronger accountability measures to ensure the program delivers on its original intent.
By backing these reforms, policymakers can help bring down drug costs without diverting funding from research and development.
Meanwhile, the administration can directly tackle the foreign freeloading problem by playing hardball with the other wealthy nations that benefit from American innovation while refusing to contribute their fair share.
President Trump has already demanded that NATO allies spend more on defense. He could do the same for health care – by pressing trade partners to spend a set share of their GDP on new innovative medicines. That would ease the burden on American patients and taxpayers, since artificially suppressed foreign prices account for an estimated 26% of U.S. prices.
That’s a more suitable path than adopting “most favored nation” pricing – a misnomer more accurately described as “foreign-first pricing” – that would let foreign governments in effect dictate what Americans pay for lifesaving medicines and ultimately could significantly reduce the medicines that American patients are able to access.
As the White House has noted, other countries’ government-run healthcare systems suppress prices through both direct mandates and indirect tactics, like delaying or denying access to new treatments. It makes no sense to adopt foreign pricing as a benchmark when the administration itself has noted those prices are held artificially low.
Those price control tactics have direct consequences. Consider Europe, which invented a majority of the world’s new drugs in the 1980s, while the United States produced less than one-third. Today, that dynamic has flipped – the United States now develops more than twice as many new treatments as Europe.
Decades of government rationing and price caps suppressed research investment across Europe, costing countless lives and wiping out many high-skilled jobs. At one point, Europe contributed nearly 50% of global pharmaceutical R&D investment, while the United States lagged behind at just 33%. Now, the United States leads with 55% – nearly double Europe’s 29%.
But that competitive edge isn’t assured. China now barely trails the United States in the share of new clinical trial starts globally and has already surpassed us in hosting cancer clinical trials, with 39% of the global total. The only way to stay ahead is by cementing the United States as the world’s most attractive market for pharmaceutical research and investment.
To do that, we must reject foreign price control models that ration care and suppress innovation. If we instead required hospitals and PBMs to pass along the steep discounts they already receive – and ensured wealthy nations paid their fair share – U.S. prices could fall without jeopardizing our life sciences edge.
The Trump administration has correctly diagnosed the problem. Now it must prescribe the right solution: market-based reforms that rein in domestic middlemen and demand fairness from our allies.
That’s how we lower prices, preserve innovation, and put America first.