Opposing Cost-Containment Measures: MFN in the US vs. MFG in Germany and their impact on pharmaceutical companies’ launch strategies

Summary

Both the MFN and MFG aim to curb medicine costs without sacrificing access, but their approaches are completely different. MFG hopes to achieve cost containment through the offer of a confidential price if manufacturers agree to a 9% reduction in price and demonstrate domestic investment in the country. MFN targets cost containment through price transparency; manufacturers are expected to share their net prices across markets so the US price can be benchmarked against the lowest from a referenced basket of economically similar countries. While the implementation and repercussions of each policy are still to be seen, both large and smaller manufacturers should consider market access strategies that include broader manufacturing plans alongside these policies. Considerations should include how the opposing approaches could be leveraged differently to mitigate against unexpected penalties, for example, the risk of 100% import tariffs in the US if companies don’t lower prices, or the risk of being locked out of Germany’s market if one doesn’t invest locally.

Below we look at how this direct conflict in approach could influence market access strategy in different markets and explore how Mounjaro navigated both markets’ policies to achieve the same goal.

Introduction

Pharmaceutical pricing is a focus of numerous governments throughout the world. Methods can include regulating distribution changes, reference pricing (either internal or external), promotion of generics, and tariff or tax exemptions[1]. The goal of all these varying methods is to achieve cost containment—i.e., reduction in spending for pharmaceuticals or capping the possibility of increasing costs.

Another common area of focus for governments is encouraging investment within the domestic market. We have seen this play out in the pharmaceutical industry through incentive programs to encourage research and development and clinical trials, such as the Life Sciences Investment Program launched in the UK².

Germany has attempted to achieve cost containment and encourage investment in one policy, the German Medical Research Act (Medizinforschungsgesetz, MFG)³. This policy offers a confidential discounted price if the company meets the required amount of local research and development activities within Germany and agrees to a 9% discount on their negotiated net price.

The US administration has focused on cost containment in the Most Favoured Nations (MFN) Executive Order, while domestic investment is a target through broader tariffs on international imports. MFN directs CMS to pay no more than the lowest price paid by other developed nations.

While both MFG and MFN have the same goal, the conflicting approach to achieving this means manufacturers need to consider carefully how these policies could influence expected price and what this might mean in terms of launch timing and broader strategic approaches globally.

Identifying a target price: Does additional value matter?

Both the US and Germany use benchmarking or reference pricing to identify target prices for an asset. However, as with the policies, how these are implemented is very different.

The US plans to identify a market basket of countries against which to reference the lowest price (where the price benchmark is yet to be defined) and adopt that as a straight price. Germany will consider other prices globally but will largely consider clinical comparators internally and determine whether the new therapy offers additional clinical benefit. This benefit is then quantified as additional value to determine the final price.

MFN does not consider the additional benefit but instead pegs U.S. prices to the outcomes of other nations’ pricing decisions (which may not reflect U.S.-specific value or health economics). Germany, by contrast, considers the additional value to the German population in the context of the cost of similar drugs within the same market.

Barriers and challenges exist for either approach.

• Many countries do not share their true net prices; MFN could be undermined by manufacturers if they are unable or unwilling to provide net pricing. This could lead to the US government implementing mechanisms to compel manufacturers to share confidential prices. If this happens, does this erode any value in confidential pricing in other markets?
• If a therapy has only generics as comparators, the price could be very limited even if there is a high perceived additional clinical benefit. This could lead manufacturers to consider pausing or not launching in Germany, or any other country, if there is concern the true value is not going to be recognized and could additionally affect more valuable markets.
• Removing price transparency is a different direction for Germany traditionally, and so policymakers intend to review the policy (the “sunset clause”) in 2028 to ensure it is achieving the intended outcome (additional investment in Germany and better access at lower prices). The novel aspect of this approach and required review could indicate that MFG may change in the future depending on the outcome of the review.
• Not all manufacturers or assets will be eligible for MFN or MFG. Manufacturers may increase investment in Germany in order to achieve eligibility for MFG, while manufacturers may focus on innovative drugs to avoid MFN consideration. This will depend on manufacturers’ pipelines and other priorities but is likely to be considered by eligible manufacturers.

Because MFN and MFG structurally affect prices so differently, these policies, and others like them, could affect traditional launch sequencing plans for manufacturers.

What do these policies mean for launch strategy?

Traditionally, the US has been one of the first launch countries due to the free-pricing market and large population. Germany is also commonly one of the early launch markets, particularly in Europe, because of the size of the market and initial free pricing in the first six months of launch.

MFN could encourage manufacturers to launch first in the US and have more discretion when selecting follow-on countries, which may lead to other countries losing access or receiving products later than would occur in a non-MFN world. This is because companies may avoid launching in smaller, lower-paying markets to prevent the US price from being affected. Nuanced launch strategies may mitigate the impact on smaller markets, but the impact should be closely considered to prevent widening health disparities.

Alternatively, raised prices in other markets could be observed to offset the impact of MFN. This could lead to difficulty for patients accessing medicines, even if available in that country. Alternatively, we may see increased instances of confidential discount agreements with higher public prices while keeping the agreed net price lower (similar to the MFG 9% confidential discount), creating potential conflict with the net pricing disclosure requirements of the MFN Executive Order. Whether this is a realistic strategy depends on the imposed obligations and enforcement by the United States to force disclosure of confidential prices with other sovereign nations. We have seen previously how concerns regarding the influence of reference pricing resulted in reduced access. In Germany (a commonly referenced price market), after the free pricing period, some companies left the German market due to concerns they would not receive an “added benefit” rating and would be given a lower price that could affect reference pricing globally. The MFG offers manufacturers an alternative option to remain in the market with a confidential price.

A manufacturer is eligible for the MFG benefit only if the domestic investment requirement is demonstrated within Germany, so this should be considered when determining how to launch or how long to remain in the German market. While it will not be applicable to all manufacturers, the initiative demonstrates how pricing levers may increasingly be used to influence investment behavior.

In the US, tariffs are being used to apply pressure on companies to increase domestic manufacturing strategies separate from any MFN implementation. Therefore, manufacturers should consider whether a strategic decision to minimize MFN impact will be offset by tariffs and how this might influence overall pricing. (Note: recent Pfizer and AstraZeneca deals demonstrate a potential route to reduce or prevent tariffs by covering MFN prices within CMS—specifically Medicaid—committing to lower prices directly to Americans, and domestic investment to delay or prevent tariff implementation.)

Market access strategy should now consider global manufacturing strategy and how this might offer advantages if investment criteria are met.

A case study: Mounjaro, Navigating both MFG and MFN

An example of a company navigating both policies is Eli Lilly with Mounjaro (tirzepatide).

In Germany, Mounjaro was launched for type 2 diabetes and underwent the AMNOG benefit assessment. It was deemed to offer “no additional benefit” over existing therapies in most cases and a “hint of a minor additional benefit” in one subpopulation, which would normally result in a relatively low price. Rather than accept a low publicly visible price (or withdraw the product as some have done in the past), Lilly chose the MFG’s confidential price option. Lilly’s significant R&D presence in Germany made it eligible for this scheme, and by August 2025 it became the first company to invoke the new MFG provisions for an innovative drug. This meant Lilly agreed to whatever discount was negotiated plus an extra 9% reduction, in exchange for keeping that final price hidden from publication.

As a result, Germany gets Mounjaro at a discount (helping cost containment), German patients keep access to the drug, and Lilly avoids a publicly low reference price that could undercut its obesity indication pricing and prices in other countries. This was exactly the outcome the German law intended—and it shows the law’s value in a scenario where a drug’s value proposition differs by indication.

To address concerns that Mounjaro might be affected by MFN, Lilly adjusted its public price in the UK, a common country used when carrying out international pricing comparisons. To offset the low NHS price being used as the “most favored nation price,” Lilly renegotiated with the NHS to increase the list price of Mounjaro. In order to prevent patient harm due to lack of access, it simultaneously agreed to confidential rebates with the NHS to offset the price increase. The objective was to lift the floor of the MFN-referenced countries.

Private patients in the UK (paying out-of-pocket for weight loss, a major use case for tirzepatide) faced much higher costs—up to £330 per month—which drew criticism and media attention. However, it is noted that some private providers might negotiate their own discounts or patients may switch to alternatives. From Lilly’s perspective, it mitigated a significant U.S. pricing risk (a very low UK price no longer exists to pull down U.S. CMS’s target) at the cost of some negative press in the UK.

This case illustrates how a pharmaceutical company could leverage a confidential pricing option in one country and preemptively adjust prices in another to mitigate the impact of US policy—all to achieve the same goal of protecting its global pricing integrity while maintaining market access.

What does this mean for market access strategy?

Some may argue that MFN is unlikely to be implemented in practice; however, the current government has demonstrated a commitment to reduce drug prices, and two major manufacturers have now voluntarily agreed to MFN for targeted patient populations. Therefore, prudent manufacturers should consider mitigation strategies if it is implemented as currently suggested:

1. Embrace a Global (and Cross-Functional) Pricing Strategy: Market access teams need to consider more weighted, integrated global pricing policies rather than local-to-global approaches. Pricing decisions for individual countries now have even greater consequences than in the past, even if they apply only to a targeted population in other key countries. Any significant price cut in one market may now reverberate globally—either through direct reference pricing or through MFN’s enforced parity. Likewise, any attempt to secure a higher price in a major market might require offering concessions (discounts, investment) elsewhere. Companies should establish internal “Price Harmonization” task forces that include market access, regulatory, supply chain, and government affairs roles to evaluate how a pricing or launch decision in Country A will affect business in Countries B, C, and D.
2. Reassess Launch Sequencing and Market Prioritization: The traditional playbook of “U.S. first, EU5 soon after, then rest of world” may need revision. Under MFN, the U.S. could remain the most common country for first launch. The larger change is likely to be seen in the sequence of follow-on markets. Companies may choose to delay launches in traditionally lower-priced markets until after the U.S. price is established or until special terms can be negotiated.
3. Invest in Value Demonstration (or Differentiate by Population): Germany’s system still rewards added benefit with higher pricing tiers. Demonstrating clinical value through trials, real-world evidence, or subgroup analysis remains critical.
4. Leverage Confidential Discounts and Differential Pricing: Separating the visible price from the net price through confidential agreements may help reconcile conflicting policies.
5. Align Manufacturing and R&D Footprint with Market Access Strategy: Industrial policy, tariffs, and local investment requirements are increasingly intertwined with pricing outcomes and should be factored into strategic planning.
6. Smaller Companies Should Remain Flexible: Early-stage companies should build adaptable pricing and access models that evolve alongside policy developments and asset maturation.

Overall, companies both large and small should consider broader policy implications beyond the US and Germany in their access strategies, including manufacturing decisions and global coordination, to support successful launches and sustainable pricing strategies.

[1] Lee KS, Kassab YW, Taha NA, Zainal ZA. Factors Impacting Pharmaceutical Prices and Affordability: Narrative Review. Pharmacy (Basel). 2020;9(1):1. Published 2020 Dec 23. doi:10.3390/pharmacy9010001