1. What’s happening:
Reports over the last six months show that a Trump administration order tying domestic drug prices to the lowest levels in select peer countries—known as Most Favored Nation (MFN)—is disincentivizing pharma companies from early launches in markets where prices are significantly cheaper.
- In early June, AstraZeneca CEO Pascal Soriot said his company may have “no choice” but to withhold drugs from the U.K.—the Anglo firm’s home market—if the country doesn't spend more on innovative medicines.
- Insmed CEO William Lewis, speaking on an earnings call after approval of his firm’s inflammatory lung disease drug Brinsupri, said the firm was delaying a launch in Germany “until we know what [MFN policies] will look like.”
- Ligand Pharma and United Therapeutics were among others to have dropped comments about MFN’s impact on ex-U.S. plans.
2. What’s the big deal
Under threat of tariffs, most major pharma companies have inked what have come to be known as “MFN deals,” pacts with the White House guaranteeing that the cost of certain drugs to Medicaid won’t exceed those in some countries in Europe, Japan, Canada, and others.
- Companies in this first wave have also agreed to lower some new drug prices in the U.S. and promised to offer direct-to-consumer discounts through TrumpRx.
- While MFN has yet to become official policy, the deals have prompted many companies to delay EU product rollouts. Pharma launches across Europe plummeted 35% in the 10 months following the administration’s introduction of MFN versus the prior period, according to a GlobalData analysis.
- Some firms are also withdrawing drugs entirely. Amgen yanked cholesterol treatment Repatha from Denmark, citing prices and a “changed environment.”
- Such removals may be the start of what GlobalData analysts call “a growing problem,” in which pharma companies—unable to secure higher European prices—may choose withdrawal from lower-priced markets rather than jeopardizing their U.S. market prices under the MFN’s international reference pricing (IRP) system.
3. What’s at stake
A potential $529 billion in savings over the next decade, according to a White House projection which takes into account discounted rates across Medicaid/Medicare and private insurance.
- The policy could accelerate the shift away from small molecules toward biologics and cell and gene therapies (CGT), whose prices are harder to reference across markets.
- But it could lead to fewer licensing deals, by making biotechs skiddish about entering European partnerships for fear of tripping MFN provisions.
- MFN could also pose a real threat to biotechs whose portfolios aren’t broad enough to absorb the revenue hit, argues the Midsized Biotech Alliance of America (MBAA), a new industry klatch formed to represent commercial-stage firms with one or two products on the market.
4. What’s it mean for commercial execs
In this system, the place where firms launch first could influence global pricing. Commercial executives are incentivized to limit entry to the markets where they can charge the most and avoid triggering a low U.S. price.
- “This concept isn’t new to the industry, but an extension of what companies have been doing for decades in Europe, carefully managing which markets reference which other markets to avoid trip wires that might erode profitability prematurely,” noted Robert Rouse, Value & Access practice leader at Beghou.
- However, the fact that MFN has been introduced to the U.S. makes it “exponentially more important,” given the country accounts for 67% of global pharma revenues, added Rouse.
- He says U.S. firms must realize they're no longer insulated from global pricing logic and to watch out for early launches in markets that are small or have a lower GDP, as these can become strategic “trip wires.”
- Rouse also counsels commercial execs to vet pipeline decisions by their pricing resilience and to model new assets by MFN and IRP factors alongside the usual scientific and regulatory risk.
5. What’s next
If the Trump administration, which wants to expand MFN beyond the drugmakers initially targeted (again by threatening tariffs), does push ahead, companies can swallow lower prices in the U.S., cajole reference countries to raise theirs, or limit where and when they launch new treatments.
- Yet, MFN faces resistance from industry groups, like Pharmaceutical Research and Manufacturers of America (PhRMA), which asserts that MFN essentially “import[s] the flaws of foreign healthcare systems” set by other wealthy countries "based on outdated, discriminatory policies that undervalue medicines.”
- Two pricing demos introduced by the Centers for Medicare & Medicaid Services (CMS), designed to test alternative ways of calculating Medicare rebates based on the IRP system, prompted legal concerns from industry attorneys over the government’s authority to implement them, per Bloomberg Law.
- Meantime, European governments like those in the UK and France that have had the advantage of a stronger lever on price than the U.S. are starting to see companies becoming more “choiceful” about launching there, Rouse said.
- "If I risk some kind of MFN adjustment because I priced [my drug] in a certain way in the Czech Republic, well, I'm just not going to launch it in the Czech Republic,” he explained. “I'm protecting my ability to price at a premium.”