Kowalski: Why Drug Pricing Reform Must Start with PBMs—Not Price Controls

Recent efforts to revive the so-called “Most Favored Nation” (MFN) drug pricing policy have reignited debate over how best to lower prescription drug costs in the U.S.

Proponents claim it’s a simple fix: tie what Medicare pays for drugs to the lowest prices in other wealthy nations.

But beneath the surface, MFN represents a deeply flawed policy that fails to address the real drivers of high costs and threatens major consequences for innovation, jobs, and patients—especially in states like Texas.

The MFN model would impose foreign-style government price controls on the U.S. system by pegging Medicare drug prices to the lowest rates paid by other nations. This approach ignores the actual structure of drug pricing in America, where pharmacy benefit managers (PBMs)—not manufacturers—control the prices patients pay at the counter. These powerful middlemen negotiate behind closed doors, collecting significant fees and rebates that inflate costs for consumers while adding nothing of value. And they do this without transparency or accountability.

Instead of addressing this broken part of the system, MFN would introduce more regulation—this time copied from foreign countries with completely different economic models and healthcare structures. These price controls wouldn’t touch the PBMs or the complex rebate schemes that currently drive-up U.S. drug costs. They would, however, devastate innovation and economic growth.

A Pacific Research Institute post underscores just how skewed the U.S. system has become. For example, in Germany, patients pay about $62 for a month’s supply of Eliquis, while in the U.S., PBMs alone pocket nearly $250 in fees on the same drug. In the case of the diabetes drug Jardiance, the United Kingdom pays under $50 per month, while American PBMs collect over $250 per prescription. These excessive markups don’t benefit patients – they simply enrich middlemen.

By failing to confront PBMs, the MFN model targets the wrong part of the supply chain. Worse, it threatens America’s leadership in life sciences at a time when global competition is intensifying. China, in particular, is rapidly catching up. As recent analyses have shown, China now sponsors nearly a third of global industry-funded clinical trials and is aggressively investing in its domestic pharmaceutical capabilities.

Texas, with its strong biotechnology presence, is deeply vulnerable to the job losses and reduced investment that would follow from MFN. Our state is home to thousands of life sciences jobs—from research and development to advanced manufacturing. MFN would choke off the investment these jobs depend on and open the door to more competition from countries like China, which are eager to capitalize on our regulatory missteps.

If we want to lower drug costs while protecting innovation and jobs, reform must start with PBMs. Congress should eliminate the hidden fees, inflated markups, and anti-competitive practices that allow these middlemen to profit at the expense of patients and taxpayers alike. Simply importing foreign price controls won’t make our system fairer or more affordable—but PBM reform will.

The choice is clear: we can protect American jobs, maintain our innovation leadership, and truly reduce costs by reining in PBMs—or we can adopt a flawed model that fails patients and puts states like Texas at economic risk.

Editor’s Note: The above guest column was penned by Austin-based Tom Kowalski, co-chair of the We Work For Health Coalition. The column appears in the Rio Grande Guardian with the permission of the author. 

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