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.

While MFN pricing is seen as a major threat, it could have an unexpected positive effect. It would force companies launching new drugs to establish a GDP-adjusted global price from the start, ending the current system where the U.S. effectively subsidizes lower prices elsewhere.

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 fix the R&D funding imbalance, the CEO proposes a 'one fair price' system. A drug would have one US price with no rebates, and a price in other developed nations would be indexed to their GDP per capita.

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.

Selling low-cost vaccines to organizations like Gavi isn't just charity for pharmaceutical companies. It creates massive economies of scale, lowering the cost of goods for their high-margin primary markets and increasing overall net profit, creating a powerful win-win incentive structure.

Unlike labor-dependent services that get more expensive, prescription drugs offer a unique societal ROI because they eventually go generic and become cheaper. This deflationary aspect is a powerful, underappreciated argument for investing in drug development, as successful medicines provide compounding value to society over time.