Starting in January, the model, known as the Most Favored Nation (MFN) Model, would test the impact of reimbursing for high cost, physician-administered Medicare Part B drugs at the lowest price charged in other similar countries. The plan would tie Medicare payments for 50 costly medicines administered in a physician’s office — including therapies for cancer and rheumatoid arthritis — based on a "blending formula" that includes the lowest adjusted international price for the product between a group of OECD countries with similar GDPs to the United States. The policy would except some providers, including hospitals for children, cancer patients and critical care, plus rural health clinics, federally qualified health centers, and Indian Health Service facilities.
The Trump administration plans for the most-favored nations rule to be phased in over the first four years of a seven-year model that gradually shifts from a drug's average sales price (ASP) to the much-lower cost calculated by the formula. As of January 1, 2021, the payment would be the sum of 75 percent of the ASP that is currently used to reimburse for such drugs, and 25 percent of the calculated MFN price.
The plan is almost certain to draw legal challenges because it was never formally proposed as a draft rule. HHS’ justification for circumventing the regular rulemaking order and timeline is predicated on an urgent need to address high drug prices, particularly in light of COVID-19. Aside from procedural process issues with the MFN interim final rule, several policy experts have already pointed out in preliminary analysis that, of the demo’s expected $85.5B in savings over seven years “a portion of those savings” come from a roughly 19 percent of Medicare beneficiaries not accessing their choice of medicines starting, in 2023.
President-elect Biden has not made any public pronouncement on the MFN model, so it is not certain that it would be withdrawn. President-elect Biden has discussed using an independent review board to link pricing of high cost drugs to value-based measures. The impact of such a methodology would likely cut costs significantly for some drugs, but carrying out such a measure would require either a change in statute or adoption as part of a demonstration model.
Additional information about MFN can be found here.