The Impact of MFN Pricing on the U.S. Biosimilar Market

Could a cost-cutting policy designed to rein in drug prices backfire on biosimilar competition? The Most Favored Nation (MFN) pricing model aims to reduce U.S. biologic drug costs by benchmarking them against the lowest international prices. However, the intersection of MFN pricing and biosimilar market impact raises concerns. While not directly targeting biosimilars, MFN policies may reshape market dynamics in ways that threaten manufacturer participation, reduce competition, and ultimately limit patient access. This article explores how MFN pricing could unintentionally destabilize the U.S. biosimilar market and reverse cost-saving trends.

MFN Pricing and Biosimilar Market Impact: A Pressure Point for Competition

MFN policies primarily focus on biologics that lack biosimilar competition, aligning U.S. prices with the lowest levels observed in OECD nations. This alignment could result in price cuts ranging from 30% to 80%—for instance, reducing a $100 drug to as low as $20. Although biosimilars are not the direct target, their pricing strategies are likely to feel the pressure. As payer expectations shift, biosimilars—typically priced 15%–30% below the reference product—may be pushed toward unsustainably steep discounts.

Such margin compression poses a risk, particularly for manufacturers of complex biosimilars like monoclonal antibodies. Historical precedent suggests that these dynamics could lead to market exits within 3 to 5 years, as was seen in the early days of filgrastim biosimilar competition.

Biosimilar Shortages and MFN: Long-Term Price Risks

The potential for a biosimilar shortage arises when manufacturers withdraw due to unprofitable pricing conditions—a process that tends to unfold gradually, over 5 to 10 years. Even before MFN implementation, concerns about biosimilar viability in the U.S. were already mounting. High-cost products such as infliximab have struggled to gain traction, capturing just 13% of the market, despite the substantial investment required—often $100 million to $300 million per product.

Where biosimilars thrive, the benefits are evident: bevacizumab (Avastin) and trastuzumab (Herceptin) biosimilars, capturing over 80% market share by 2023, have reduced prices by 30%–45%, contributing to Medicare savings of approximately $10 billion–$15 billion from 2019 to 2023. However, if biosimilar availability falters—as seen with infliximab, where limited uptake allowed originator pricing to persist—brand-name drugs could regain pricing power post-patent. This risk looms for high-value biologics like adalimumab (Humira), currently priced at $80,000–$90,000 annually, potentially sustaining treatment costs of $50,000–$80,000 per year by 2030–2035 if patent barriers or slow biosimilar adoption persist.

While reimbursement strategies like Medicare’s ASP+6% model and formulary controls offer some guardrails, they may be insufficient in the absence of stronger uptake policies. Compared to Europe’s more proactive stance—such as automatic substitution—the U.S. remains relatively hands-off.

How MFN Policies May Escalate Biologic Drug Costs

Over time, a shrinking biosimilar market may reinforce a self-perpetuating cycle. As firms exit due to low margins, originator prices can rise (or not reduce further after MFN adjustments), further deterring new entrants. The high cost and complexity of development mean that it typically takes 3–5 years for new biosimilars to replace those lost, and ongoing patent litigation or lengthy contract renegotiations can extend this delay. Value-based contracts may help moderate pricing trends, but their impact often lags behind market shifts.

Without intervention, the number of active biosimilar developers is likely to dwindle, especially if MFN pricing biosimilars indirectly depresses the incentive to stay in the market over the long term.

Sustaining the Biosimilar Market Under MFN Pricing Pressure

To safeguard the potential of biosimilars, stakeholders across the healthcare ecosystem must act with urgency and precision. Encouraging greater uptake—through reduced patient copays, improved formulary placement, and clearer interchangeability standards—can help stabilize demand. Simultaneously, streamlining FDA approval pathways and reforming patent litigation practices could lower the barriers to entry.

Absent such measures, the biosimilar market may erode over the next decade, undermining not only the intended savings of MFN pricing but also the broader goal of expanding patient access to affordable therapies. Proactive monitoring of market dynamics, including manufacturer exits and payer behavior, will be crucial in adapting policies to ensure both short- and long-term sustainability.