President Donald Trump’s most-favored-nation drug policy was always going to do more than change prices. It was going to change behavior.
Game theory asks a simple question: When one player changes the rewards and penalties, how will the others respond? Change the rules, and you cannot assume everyone will keep playing the same way.
That is the challenge with most-favored-nation, or MFN, drug pricing. Washington can change the benchmark. But drugmakers, foreign governments, and state Medicaid programs can change their strategies in response.
Now we are beginning to see those moves.
The administration has reached MFN agreements with 26 pharmaceutical manufacturers covering 89% of the branded-drug market. It is also testing international-reference pricing in Medicaid and pursuing similar approaches in Medicare. The policy’s premise is straightforward: Americans should not pay more for the same medicines simply because they live in the United States.
But a foreign drug price is not a fixed fact. It is the product of a negotiation. Once that number can influence what a manufacturer earns in the much larger American market, the negotiation itself changes.
When foreign countries move
Britain is the clearest example.
Under its pharmaceutical agreement with Washington, the British government agreed to increase the net price paid by the National Health Service for prospective new medicines by 25% and to double spending on new medicines as a share of gross domestic product by 2036. The agreement also includes protections intended to reduce the incentive for manufacturers to avoid launching medicines in Britain merely because a low British price could become an American benchmark.
America is not simply importing Britain’s price. It is helping change the price Britain is willing to pay.
Switzerland shows the other possible response. In August, the Swiss pharmaceutical trade association Interpharma reported that member companies declined to seek routine reimbursement for seven of 22 new innovative medicines between January 2025 and June 2026 because of MFN concerns.
That is an industry survey, and it cannot prove that U.S. policy caused every missing application. But the incentive is easy to see: accepting a low price in a country of nine million people becomes less attractive if that price can reduce revenue in the United States.
When drugmakers move
The manufacturers are not passive either.
Washington now has separate MFN agreements with 26 drugmakers. Many details of those agreements remain undisclosed, which makes their ultimate effect difficult to measure.
But a new Lancet analysis shows why those agreements could matter.
Researchers examined 195 brand-name medicines accounting for $87.9 billion in Medicare spending. They estimated that the proposed GLOBE and GUARD international-reference-pricing models could reduce net Medicare spending by $5.2 billion and $6.4 billion, respectively. But in a scenario in which manufacturers with separate federal agreements were exempt from the models, estimated savings fell by 71.3%.
That is not evidence that 71% of the savings will actually disappear. It is a scenario analysis, and the final rules and deal terms matter.
But it illustrates the next move in the game.
Faced with mandatory international-reference pricing, a manufacturer has another option: negotiate. Give Washington something it wants — lower Medicaid prices, direct-to-consumer discounts, domestic investment or other concessions — and try to avoid something the company dislikes even more.
The benchmark changes the company’s strategy. The company’s response can then change Washington’s strategy.
When states move
Now the states are entering the game.
On Sept. 18, the Centers for Medicare and Medicaid Services announced that all 50 states, the District of Columbia, and Puerto Rico had applied to participate in the GENEROUS Medicaid model. Forty states and Puerto Rico had signed participation agreements at that point; the others had until Sept. 30 to finalize their applications.
The distinction matters.
Several states subsequently told STAT, a health and medicine news organization, that they were still deciding whether to participate and whether the federal model actually offered better prices than rebates they already negotiate with manufacturers.
So even the states being offered MFN prices are making strategic choices. They are not asking only, “Is this price lower?” They are asking, “Is this deal better than the one we already have?”
That is the forest behind all of these individual trees.
Drugmakers are bargaining with Washington. Foreign governments are changing their pricing strategies. States are comparing federal discounts with their existing deals. And Washington is adjusting its rules as each of those players responds.
None of this proves that MFN will fail. Nor does it prove that it will deliver the savings its advocates project. The policy is still evolving, many agreement terms remain confidential, and drug-launch decisions have more than one cause.
But it does show why judging MFN only by the prices announced at the beginning of the experiment misses the larger story.
A benchmark changes behavior precisely because it matters.
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The question is no longer simply whether Washington can use low foreign prices to lower American drug costs.
It is whether those foreign prices will stay low once drugmakers and governments know they can help determine what America pays.
Arie Blitz, M.D., M.B.A., is a retired physician and independent writer in Weslaco, Texas, who writes on medical policy, economics, and public policy.