Following the lowest prices in developed countries, nine additional pharmaceutical companies in the United States have joined the prescription drug price reduction mechanism.

The most-favored-nation (MFN) prescription drug pricing mechanism introduced by the U.S. government continues to advance, with the scope of prescription drug companies and drugs covered by the policy further expanded.

New signed agreement takes effect on September 1, 9 mid-sized pharmaceutical companies to participate in MFN pricing

On September 1 local time, U.S. President Trump announced that he had reached a new voluntary cooperation agreement with 9 pharmaceutical companies. According to the agreement rules, relevant enterprises will lower the prices of prescription drugs in the U.S. market by referring to the lowest drug prices in other developed countries, that is, the most-favored-nation prices.

The main subjects of this signing are global mid-sized pharmaceutical enterprises. BeiGene (ONC.US, 06160.HK, 688235.SH) has become the first Chinese innovative pharmaceutical company on the list. The other 8 enterprises are Alcon, Astellas Pharma, BridgeBio, CSL, Kyowa Kirin, Sun Pharma, Teva Pharmaceutical Industries and UCB.

With the joining of these 9 enterprises, the total number of pharmaceutical companies that have reached MFN pricing agreements with the U.S. government has increased to 26, covering 89% of the U.S. brand-name drug market. According to White House information, the 9 signed enterprises also promised to invest no less than 19.6 billion U.S. dollars in U.S. local manufacturing industry in total.

BeiGene's core product included, mainly targeting the U.S. Medicaid healthcare system

The product of BeiGene included in the agreement this time is PD-1 inhibitor tislelizumab (百泽安®), which is the core cornerstone product of the company's solid tumor segment, First Finance. According to the agreement, this drug will be supplied to eligible patient groups under the U.S. Medicaid program at the price agreed under the most-favored-nation principle.

Medicaid is the U.S. medical assistance program for low-income groups, covering vulnerable groups such as the elderly, people with disabilities and low-income families. According to the disclosure, the population covered by this agreement accounts for about 8% of the total number of patients with the approved indications of tislelizumab in the United States.

BeiGene stated that this is a voluntary commercial arrangement for the U.S. local market, aiming to improve the accessibility of innovative drugs and benefit more eligible patients. At the same time, the agreement requires that new innovative drugs launched by the enterprise in the United States in the future also need to follow the MFN pricing rules.

Underlying logic of the MFN policy: changing the global pricing model of multinational pharmaceutical companies

The U.S. most-favored-nation (MFN) pricing mechanism originated from an executive order. The core requirement of the policy is that the drug prices provided by pharmaceutical companies in the United States shall not be higher than the lowest selling prices in other high-income developed countries, aiming to change the status quo that U.S. prescription drug prices have been significantly higher than overseas markets for a long time, and change the global pricing pattern of "the United States bears the main R&D costs, while other countries enjoy low prices".

The policy promotion path mainly takes voluntary enterprise signing as the main method, and the U.S. government continues to promote pharmaceutical companies to join the agreement in batches. Several batches of multinational pharmaceutical companies have completed signing before. This new batch of mid-sized pharmaceutical enterprises joining marks that the policy further penetrates from large originator enterprises to mid-sized innovative drug enterprises, and non-U.S. local pharmaceutical companies are also deeply included in the policy framework.

Industry impact: Global innovative drug pricing pattern is facing disruption

Market analysis points out that the continuous expansion of the MFN policy will force multinational pharmaceutical companies to reorganize their global drug quotation systems. For Chinese innovative pharmaceutical companies going global, after entering the U.S. market, they will directly face MFN pricing constraints. A price cut of a drug in the United States will jointly affect the price benchmarks of other developed markets.

On the one hand, the agreement can help products enter the U.S. public medical insurance channels and broaden patient coverage; on the other hand, the price benchmarking against the lowest prices in developed countries will compress the sales profit space of the U.S. market, which will test the overseas commercialization benefits of pharmaceutical companies.

The market will focus on the signing trends of more innovative pharmaceutical companies in the follow-up, as well as the actual restrictive effect of the MFN pricing clause on the enterprise's global pricing strategy when new drugs are declared for marketing.