Balancing Innovation and Equity: Most-Favored-Nation Drug Pricing and the Mixed Promise of Value-Based Care

This policy analysis examines two transformative approaches to healthcare: Most-Favored-Nation (MFN) drug pricing and Value-Based Care (VBC), and their benefits and dangers portend for constraining increasing healthcare expenditures and improving outcomes within the United States. The MFN Executive Order aims to align U.S. drug prices with those in comparable nations, thereby curbing pharmaceutical costs domestically while raising concerns about global equity and innovation. While VBC models have gained prominence in payment for outcomes, rather than volume, empirical findings reveal improved quality with mixed cost containment.By synthesizing empirical studies of MFN mechanisms of drug prices and convergent VBC implementations, such as Value-Based Insurance Design (VBID) and health system-level transformations, this paper concludes that neither initiative alone addresses inefficiency within a system. A hybrid approach, focusing on outcome equity, infrastructure investment, and global coordination of prices, appears to be the most practical way to improve care quality while maintaining fiscal responsibility.