Trends in the U.S. MFN Drug Pricing Policy and the Response Required of Japan

The Trump administration is advancing a Most-Favored-Nation (MFN) drug pricing policy aimed at curbing pharmaceutical spending in the United States. The policy benchmarks U.S. drug prices against those of other developed countries (adjusted for GDP per capita) and lowers U.S. prices to the level of the lowest-priced country, with specific price-adjustment mechanisms already laid out. Japan is among the reference countries, yet its drug prices are already low by developed-country standards. As other nations move to mitigate their exposure to this referencing, Japan risks becoming the floor for MFN reference prices unless it reforms its own pricing system—raising concerns of a resurgence of drug lag and drug loss. This paper outlines the structure of the MFN policy and the responses of other countries, and then discusses the measures Japan should take ahead of its next drug pricing system reform.