Should America Stop Paying for the World's Medicines? Conservatives Split

Two conservatives walk into a pharmacy. The first looks at the price of a brand-name medicine and says, "Other rich countries pay less for this. Make them the benchmark." The second looks at the same price and says, "Other rich countries pay less because their governments say so. Why would we import the very thing we oppose at home?"

Both are conservatives. Both are angry about the same fact. They disagree about the cure, and the disagreement is not a squabble. It is a real argument about markets, trade and what the government may do, and each side has a point. This post gives both a fair hearing, sets out the legal tools involved, and then does what a commentator is supposed to do: argues for one.

The fact both sides accept

Let me start where they agree, since agreement is rarer than it should be.

Americans generally pay more for brand-name prescription drugs than patients in other wealthy countries do. That is true on the list price, and, for many drugs, on the net price as well. Part of the reason is that other advanced countries operate national or regional systems in which a government agency is effectively the only large buyer, and it sets or negotiates prices under law. A company that wants to sell in that market accepts the agency's price or does not sell. In economics this is called monopsony: one buyer facing many sellers.

Here is the structure that follows. A new drug costs a great deal to develop, and most of that cost is fixed: it was spent before the first pill was sold. The cost of making each additional pill, the marginal cost, is usually small. Once the drug exists, any country that pays more than the marginal cost is better off buying than not buying, and a government with monopsony power can offer a price just above the marginal cost. A company that has already spent the fixed cost will take it, because something is better than nothing in that country.

But somebody has to pay the fixed cost, or the drug never gets invented. If every country pays only marginal cost plus a little, the fixed cost goes unpaid. In practice the American market, with its far larger prices, pays for a disproportionate share. That is the free rider problem, and it is why this issue is not only about American patients' wallets. It is about who pays for the cures that the whole world enjoys.

An illustration, with hypothetical numbers. Suppose a drug cost $1 billion to develop, and the world market is ten equal countries. A fair split of the fixed cost would be $100 million from each. Suppose nine of the countries pay only enough to cover the pills' marginal cost and contribute $10 million each toward the fixed cost, a total of $90 million. The tenth country must then supply the remaining $910 million, or the drug is not developed. The arithmetic is 1,000 minus 90 equals 910. A single country carrying over 90 percent of the burden is a harsh example, and the real figures are less stark and contested, but the logic is the same, and the logic is what drives the policy fight.

Position one: import their prices

The first conservative answer is to tie American prices to the foreign prices. The proposals go by the name most-favored-nation pricing, or MFN, and reference pricing. Under reference pricing, a payer sets what it will pay for a drug by looking at what other countries pay. Under an MFN approach, the United States would pay no more than the lowest price, or an average of low prices, in a basket of comparable countries.

President Trump issued executive orders on this subject in both his terms. In September 2020 he signed an order directing that the United States obtain prices for Medicare at least as favorable as those in other developed countries. In November 2020 the Centers for Medicare & Medicaid Services issued an interim final rule creating a Medicare payment model for certain Part B drugs based on international prices. A federal court blocked that rule before it took effect, concerned about the way it had been issued without the usual notice and comment, and the next administration later withdrew it. In May 2025 the President signed another order on most-favored-nation pricing, directing the Department of Health and Human Services to set targets for what manufacturers should charge and to pursue rulemaking and other measures if companies did not comply, and pressing the trade agencies to act against what the order called foreign freeloading. The details of the 2025 effort have been moving, so for its current state read the text of the order and the later agency actions on the Federal Register and White House websites.

The case for this position is a simple moral claim. American patients are being asked to pay for the world's medicine, and the rest of the world is taking advantage. If the other countries will not raise their prices, the argument runs, Americans should refuse to be the only ones to pay. It is a position that puts American patients first, and it is hard to hear it without sympathy. A patient who cannot afford a prescription does not care about monopsony theory.

Position two: importing a price control is still a price control

The second conservative answer is the free-market objection, and I think it deserves more credit than it usually gets in the press.

The objection runs like this. Benchmarking American prices to foreign prices does not remove the price controls from the system. It imports them. The prices in the reference countries were not set by buyers and sellers bargaining in a free market. They were set by government agencies using their monopsony power, and often by explicit formulas. If the United States ties its own prices to those numbers, it is turning another government's price decree into its own. The principle that Washington should not set the price of a private good is abandoned, with the foreign government doing the work and the American one doing the copying.

Then come the practical objections:

1. Companies will change what they do abroad. If a drug's price in the United States is tied to its lowest foreign price, a manufacturer has a strong reason to delay launching the drug in low-price countries or to ask for a higher price there. That means patients in those countries may wait longer for new medicines, and the American benchmark rises anyway. It is the same lesson I draw in Price Controls on Medicines Today Mean Fewer New Medicines Tomorrow, applied across borders.
2. The reference basket is arbitrary. Which countries count? Which prices, list or net? Adjusted for income or not? Each choice is a lever the government controls, and each is a place where lobbyists will work.
3. It does not fix the free-rider problem. If anything it hides it. The countries that underpay for innovation continue to underpay. American prices fall, and the fixed cost has to be paid from somewhere. Remember the ten-country illustration. If the tenth country pays less, either the other nine pay more, or the drug is never made.
4. It transfers power to the executive. A decree that sets a Medicare price by reference to an international formula raises the separation-of-powers question that conservatives care about. Who authorized it? The Constitution gives Congress the power to regulate commerce with foreign nations in Article I, Section 8, Clause 3, and to lay duties. A secretary acting under a general statute is on weaker ground than Congress acting by law. See the discussion of delegation in The Nondelegation Doctrine Says Congress Cannot Hand Its Job to Someone Else.

I find these objections weighty, particularly the first and the last.

The tools in the toolbox

Before I argue for one side, let me lay out the three tools Washington actually has, so that you can judge for yourself what each does.

Reference pricing. Described above. It can be applied to Medicare payment, to a federal program such as the Veterans Health Administration, or to a rule affecting private plans. The legal question in each case is what statute authorizes it.

Drug importation under Section 804. Section 804 of the Federal Food, Drug, and Cosmetic Act, added by the Medicare Modernization Act of 2003, allows the Secretary of Health and Human Services to authorize importation programs for certain prescription drugs from Canada, provided the Secretary certifies that importation will pose no additional risk to public health and safety and will result in a significant reduction in the cost of covered products to the American consumer. The statute demands a certification, and it went unused for years. In 2020 the FDA issued a rule setting up a pathway for state-sponsored importation programs, and in 2024 the FDA authorized Florida's program.

The argument for importation is a simple one: if the same drug, made to the same standard, costs less across the northern border, why not let Americans buy it there? The objection from the safety side is about supply chains, counterfeits and who is responsible for the product. The objection from the free-market side is the same as the one above: Canada's price is a regulated price. There is also a supply problem. Canada has roughly 41 million people, a small fraction of the population of the United States. If American buyers draw on Canadian supplies in any volume, either Canadian regulators will restrict exports, or manufacturers will restrict what they send to Canada, and the savings vanish. A discount that is available only as long as it is small is not a policy.

Trade negotiation. The third tool is pressure through trade. The United States has statutory tools, among them Section 301 of the Trade Act of 1974, which lets the United States Trade Representative investigate and respond to foreign practices that burden American commerce, and it has the bargaining power that comes from being the largest market in the world. The aim here is not to lower American prices by copying foreign ones, but to raise foreign payments toward a fairer share of the fixed cost. It would put the issue where it belongs: in trade agreements that address how countries treat intellectual property and what they pay for innovation.

My verdict

I will argue for the third answer, with a few additions. Here is the reasoning, in numbered form.

1. It addresses the actual problem. The problem is not that Americans pay too much in some abstract sense; it is that other rich countries pay too little for the innovation they use. Fix that, and the arithmetic changes for everybody. Importing foreign prices leaves the free-rider in place and merely redistributes the burden.
2. It is consistent with free-market principles. Asking another government to stop holding down the price of an American product is not the same as setting the price at home. Trade policy is a legitimate power, vested by the Constitution in Congress and exercised, under delegations Congress has made, by the executive. We rely on the same principle when we insist that foreign governments respect American intellectual property.
3. It keeps the incentive to innovate intact. A policy that raises foreign payments pushes revenue toward innovators; a policy that lowers American payments reduces it. If you care about the next generation of cures, you want the first.
4. It leaves the constitutional structure alone. Congress writes the trade statutes. The executive negotiates under them. Neither is asked to invent a price.

I do not say it is easy. Trade leverage can be used badly, and tariffs raise costs for American consumers, which is a conservative objection I take seriously; see Who can raise tariffs? Article I, Section 232 and the delegated power and the two views in The China shock was real, and what free traders and tariff hawks each get right. The best use of trade leverage is narrow: a target for intellectual-property protection and fair payment, not an across-the-board duty. Other countries may refuse. Some may respond by delaying access to new drugs, which would be a cost to their own patients, and one they would have to explain to their own voters.

What the MFN side gets right

I do not want to leave you thinking the first position is foolish. It is not. Its supporters are right about three things.

They are right that the status quo is not acceptable. A system where Americans bear a disproportionate share of the world's research cost, while foreign governments take the benefit, deserves to be changed.

They are right that patients need relief on a human timescale. A patient with a cancer drug at a four-figure monthly copay does not want a ten-year trade negotiation. For that patient, the problem is also one of the middle of the supply chain, the middlemen who set what a patient pays at the counter, as covered in Pharmacy Benefit Managers, the Middlemen You Never Hired, Explained. Part of the answer is transparency here at home, quickly.

And they are right that an executive who uses a credible threat can get a company to the table. What I dispute is only the legal and economic form the threat takes, not the instinct that Americans should not be the world's only paying customers.

What the Founding and the record add

The Framers worried about concentrated power, and they gave the power over foreign commerce to Congress for a reason. When a price is set by a decree from one office, the people who pay it have no one to petition except the person who wrote it. When a price is set by a trade statute, there is a record, a vote and a chance to change it. The more a policy relies on a single executive decision, the more it swings with each election, and a pharmaceutical company deciding on a decade-long investment cannot plan around a policy that reverses every four years. A durable policy needs a statute behind it.

The case in brief

1. Americans pay more than patients in other rich countries for many brand-name drugs, partly because foreign governments act as single buyers and set prices by law, leaving the United States to cover a disproportionate share of fixed research costs.
2. One conservative answer, most-favored-nation or reference pricing, as in the orders of 2020 and 2025, ties American prices to foreign ones; the other warns that importing foreign price controls is still price control, and that it leaves the free-rider in place.
3. Section 804 importation faces its own limits: it requires a safety and savings certification, and Canada's supply is too small and too regulated to supply the American market at scale.
4. The better path is trade leverage under statutes such as Section 301, aimed at getting other countries to pay a fair share, with a statute behind it so that it lasts.

What you can do: look up the current status of any most-favored-nation drug pricing order on the Federal Register website, and ask your representative whether they support putting any such policy into a statute passed by Congress instead of leaving it to executive action.