How MFN Deals May Impact Future Decisions

President Trump’s Most-Favored Nation (MFN) initiative continues to impact the industry. Most recently, the deadline passed for mid-sized pharma and biotech companies to make deals with the administration or face serious tariffs on imported goods.

The deal is designed to both reduce prices that Americans pay for pharmaceuticals while also promoting an increase in domestic manufacturing. Since it was first announced, experts in the industry have spoken both in favor and against the deal. While the initial wave of deals focused on major pharma companies who can easily adjust strategies, launch new manufacturing projects, and absorb costs, the latest headlines focused on mid-sized pharma companies, who are less likely to be able to absorb new costs.

Pharmaceutical Executive spoke with John Stanford, executive director at Incubate, about the current status of MFN and how its impacting the industry. He focused not just on the unique impact on mid-sized pharmas, but also how these deals may force companies to adjust plans for future launches or drug research.

Pharmaceutical Executive: How might MFN deals impact future decisions?
John Stanford: Broadly speaking, anything that even approximates price controls — and that is effectively what MFN and some of these other reference pricing schemes import into this country — creates a disincentive felt across the entire value chain. We are importing European value systems that have been shown not to adequately recognize the investment and risk required to develop new medicines.

While these deals are being struck by large manufacturers, they send a clear signal about the risk environment. Large pharma companies suddenly have less appetite for acquiring small biotechs — and that matters enormously, because two thirds of new drugs originate from small biotechs that are then acquired and made ready for patients by large manufacturers. But we should not ignore large pharma’s own R&D budgets, which still account for roughly a third of all innovation. That is where we will also see pressure.

There is no free lunch here. MFN deals, IRA price controls — whatever form they take — all put downward pressure on the amount of risk these companies are willing to absorb. And we will eventually find ourselves asking why we have ceded more ground to China in pharmaceutical innovation. The answer will trace back to MFN and policies like it that have steadily reduced the incentives that make the US ecosystem the most productive in the world.