The U.S. market's high prices create the large profit pool necessary to fund risky drug development. If the U.S. adopted price negotiation like other countries, the global incentive for pharmaceutical innovation would shrink, resulting in fewer new drugs being developed worldwide.

Initial panic over the MFN drug pricing scheme was based on pegging U.S. prices to the lowest in the industrialized world. The actual proposal is far less drastic, targeting the second-lowest price among a small cohort of high-income nations (G7 plus Denmark and Switzerland), a significantly less onerous benchmark.

The administration is leveraging the U.S.'s market power to demand "most favored nation" pricing from pharmaceutical companies. This forces them to offer drugs at the lowest price available in any other developed nation, slashing costs for American consumers.

By voluntarily agreeing to a watered-down version of a 'most favored nation' pricing system, pharmaceutical companies have inadvertently set a precedent. This makes it harder for them to argue against more stringent, codified pricing regulations from future administrations, as they can no longer claim it's a 'red line' they cannot cross.

Major pharmaceutical companies are now willing to deploy the "nuclear option" of pulling planned R&D investments to express displeasure with national drug pricing policies. This tactic, seen in the UK, represents a direct and aggressive strategy to pressure governments into accepting higher prices for innovative medicines.

To achieve Most Favored Nation (MFN) drug pricing, the administration paired HHS negotiators with the Commerce Secretary. While one team negotiated terms, the Commerce Secretary acted as the "hammer," holding a credible threat of crippling tariffs over pharmaceutical companies that primarily manufacture overseas. This forced compliance.

A centrist solution to high drug prices involves combining ideas from both political aisles. Oliver Libby suggests allowing Medicare to negotiate prices (a left-leaning idea) while also extending patent life for drug companies (a right-leaning idea), thus lowering costs without killing the incentive for innovation.

By negotiating the price of weight-loss drugs from $1,200 down to ~$200, the administration expects a net positive ROI for the government within two years. The savings from preventing obesity-related chronic illnesses will outweigh the drug costs.

Beyond legislation and rulemaking, the government can act as a neutral convener, bringing together competing industry players to negotiate solutions to complex problems like lowering drug prices, bypassing legislative gridlock and lengthy legal battles.