US Pharma Industry Confronts China Competition as MFN Drug Pricing Agreements Advance

Sixteen pharmaceutical companies have voluntarily agreed to Most Favored Nation (MFN) pricing, with products marketed by these companies accounting for 70% of Medicare drug spending, according to analysis by ADVI. The voluntary commitments apply across all of Medicaid and for all future drug launches.

The voluntary agreements may eliminate the need to finalize the GUARD and GLOBE demonstration projects proposed by the administration in December 2025. The GUARD and GLOBE models, authorized by the Center for Medicare and Medicaid Innovation (CMMI), would require rebates from drugmakers so that prices paid in Medicare Part D and Part B programs are at the same level as most favored nation prices paid in other countries. The administration used the threat of these models as a way to get manufacturers to the table voluntarily.

The CMS administrator stated the administration wants to codify MFN in a way that the industry finds reflective of what was signed in the contracts, to preserve innovation against "more drastic, draconian steps [that] would hurt this industry."

Meanwhile, industry leaders are raising concerns about China's growing competitiveness in the pharmaceutical sector. At an event organized by lobbying group PhRMA on 17 February in Washington DC, administration leaders and pharma executives discussed China as the chief topic on the agenda, with PhRMA ringing alarm bells that China's healthcare industry is quickly moving ahead on key metrics like the pace and cost of Phase I trials, and share of innovative therapies in development.

A venture capitalist and former FDA commissioner highlighted the changing innovation landscape, stating that 46% of the development around mRNA vaccines is taking place in China, a technology that was largely invented in the US. The current FDA Commissioner said the US needs to "be as competitive as we can be" on the China question.

The CMS administrator said it is imperative that the US maintain hegemony with the innovative leadership that already exists in the pharmaceutical sector. He stated the US needs to "streamline the process" of generating an idea and taking it to the clinic, noting that several opportunities exist, whether it be improving the ratio of approved drugs or CMS engaging with patients earlier once a drug is approved, potentially through value-based contracts.

A venture capital founder noted that Chinese biotechs are "extremely dependent" on US capital and the US market to make the economics of their ecosystem work. He highlighted the predictability and direction provided for the industry with the government's long-term plans, in addition to engineering expertise and work ethic of individuals in the workforce as key reasons for China's success in this sector.

On the domestic policy front, the US Congress recently passed the Consolidated Appropriations Act, 2026, which will require pharmacy benefit managers (PBMs) to provide detailed data on drug prices, rebates, and spread pricing-related data to employer plans. The CMS administrator called these developments "a seismic shift" and said the transparency created with the new laws will be helpful. One pharmaceutical CEO suggested that Americans will start to see drug prices drop once these laws are implemented.

The end of enhanced Affordable Care Act subsidies is driving the cost of ACA plans to an "unsustainable level," with the expense affecting people who don't use the healthcare system. Continuing the subsidies would have had a 10-year price tag of $350 billion.