Medicaid Is Not A Test Lab For Foreign Price Controls

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“Instead of doubling down on price controls, Republicans should get serious about structural … More Medicaid reform,” writes health policy expert Sally Pipes. Getty Images In a desperate bid to claim fiscal discipline without touching entitlements, President Donald J. Trump is pushing congressional Republicans to adopt a “most favored nation” (MFN) drug pricing model for Medicaid. This policy would tie Medicaid reimbursements to the lowest prices paid in other developed countries—countries where government officials dictate drug prices under threat of coercion, patent confiscation, or market exclusion. Let’s be clear: MFN is price fixing. It is not market reform. It is not a tough negotiating tactic. Republicans who fall for this scheme are abandoning any pretense of free-market principles. Medicaid doesn’t need price controls from other countries; it already imposes them here. Under the program’s existing “Best Price” rule, manufacturers must offer Medicaid the lowest price they give to any other buyer, plus pay steep, mandatory rebates. The result? Medicaid receives average discounts exceeding 50%. For many drugs, manufacturers are already forced to sell at a loss—what’s euphemistically called a “negative price.” That means the government not only takes the medicine, it also demands a cash payment for doing so. MFN would make this problem exponentially worse by anchoring Medicaid’s drug pricing to markets where prices are dictated by bureaucratic fiat. In practice, this could force companies to stop offering their drugs in Medicaid entirely. And thanks to federal law, exiting Medicaid also means forfeiting Medicare Part B coverage. One act of economic illiteracy would therefore sabotage both Medicaid and Medicare simultaneously. MFN proponents like to frame the policy as a way to stop “foreign freeloading.” But there’s nothing tough or strategic about adopting the failed price-fixing systems of Europe or Canada. International reference pricing is not a neutral benchmark. Countries…