On Monday, the White House announced most-favored-nation (MFN) pharmaceutical pricing agreements with nine additional manufacturers – Alcon, Astellas Pharma, BeOne Medicines, BridgeBio, CSL, Kyowa Kirin, Sun Pharma, Teva Pharmaceuticals, and UCB – bringing the administration’s stated deal total to 26 companies representing 89 percent of the branded drug market. These new agreements generally promise MFN pricing for state Medicaid programs and future medicines. As a brief reminder, the administration defines an MFN price as the second lowest net price from among a group of reference countries consisting of the non-U.S. G-7 nations, Denmark and Switzerland. Alongside these pricing policies, companies also agreed to nearly $20 billion in U.S. manufacturing commitments and contributions of selected active pharmaceutical ingredients to the Strategic Active Pharmaceutical Ingredients Reserve (SAPIR).

Signing these deals is a numerical expansion of the administration’s campaign to impose its will on the biopharmaceutical market, but Monday’s announcement also looked somewhat different from the 17 agreements that preceded it. The nine companies are generally smaller than the firms included in the earlier rounds, and several have portfolios concentrated in specialty medicines, rare diseases, or generics. The announcement also places notable emphasis on upstream supply chain concerns, with the aforementioned pairing of manufacturing commitments with contributions to the SAPIR.

But the growing number of agreements should force a more basic question: What kind of pharmaceutical market is the administration constructing?

It is hard to say that “MFN” describes one standardized ideal; across the 26 publicized deals, individual manufacturers appear to have negotiated different combinations of pricing commitments, manufacturing investments, tariff treatment, supply chain provisions, and product-specific exceptions. This is evident in financial documents filed with the Securities and Exchange Commission. MFN increasingly resembles a series of bilateral negotiations between the federal government and individual drugmakers with details that remain confidential rather than a transparent, generally applicable process. The common denominator is the administration’s demand that U.S. prices bear some relationship to prices available abroad; the precise obligations accompanying that principle vary considerably from company to company.

The result of MFN is not a simpler or more competitive pharmaceutical market. It is a system in which government officials negotiate simultaneously over prices, trade policy, manufacturing location, and supply chain commitments on a company-by-company basis.

Unifying a series of bilateral deals under the MFN label hides the central problem with the overall approach: The policy replaces natural price formation in the U.S. market with centrally planned economic theory. At worst, MFN is an administratively imported price ceiling from an entity that doesn’t reflect the values of individual patients, and at best it is an unrepresentative, non-market based negotiated rate. This type of intervention is extraordinarily consequential. A drug’s permissible price would no longer principally reflect its clinical value, available therapeutic alternatives, negotiations between manufacturers and payers, or the willingness of U.S. consumers to pay. Instead, it would depend on decisions made by governments – both foreign and domestic (see: Inflation Reduction Act) – operating health systems with different budgets, coverage rules, access restrictions, and assessments of value. Reference pricing does not discover what a medicine is worth in the U.S. market; it imports a judgment reached under someone else’s market – or, more often, someone else’s price-control regime.

And because prospective MFN applies to medicines before they launch, it changes the economics of developing them in the first place. The Congressional Budget Office concluded that international reference pricing would dampen private pharmaceutical research and development investment more than the other major drug-pricing approaches it examined because it would limit manufacturers’ ability to charge market-based prices, reducing both current and expected future revenues. That finding should be admonitory: The effects begin well before a medicine reaches a pharmacy counter. Expected revenues inform which compounds move into expensive late-stage trials, which additional indications are pursued, which small biotechnology companies can attract capital, and which assets larger manufacturers decide are worth licensing or acquiring.

None of this requires believing that pharmaceutical investment will plunge overnight, or that every dollar of pharmaceutical revenue produces a dollar of worthwhile innovation. Neither proposition is credible. It does require recognizing that there is a distinction between reducing prices through rational and enduring market competition and simply declaring that the U.S. return on a successful medicine will be determined by the lowest acceptable price somewhere else.

Adoption of this posture is a remarkable direction for an administration ostensibly committed to American exceptionalism and deregulatory action. The alternative to high drug prices should be a market that disciplines them: faster generic and biosimilar competition, more efficient FDA review, fewer barriers to manufacturing, and greater competition among therapies. MFN instead disciplines prices through government force and foreign benchmarks.

Twenty-six agreements certainly make MFN more important than it was a year ago. They make its flaws more important, too. These deals may succeed in securing lower prices on specific medicines, and if patients receive those discounts, they will understandably welcome them. But a lower administered price is not synonymous with a better-functioning market. The United States should be working to make pharmaceutical competition better, not replacing it with a system in which Washington decides that the right U.S. price is whatever another government happened to negotiate first.