The Therapeutic Areas or Deals That Might Be Negatively Impacted by MFN Deals

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: Which therapeutic areas or deals might be negatively impacted by MFN deals?
John Stanford: What we saw coming out of the IRA — and what we will begin to see with MFN — is that the damage to innovation is not indiscriminate. Certain therapeutic areas are being disproportionately harmed. We know from the small molecule pill penalty that cancer and diseases of the brain are significantly disadvantaged and have seen measurably less investment as a result. That should concern everyone with a loved one living with Alzheimer’s.

The MFN deals are harder to analyze precisely because we do not know what is in them. But I think the first casualty is the moonshot. When a company is under pressure to strike a deal with the White House — or face reference pricing — it cannot reach for the wild home run. It cannot pursue something with no comparator product, no established patient population, no way to go to payers and make a straightforward value argument. That is the most serious early-stage concern: Washington is sending a signal that says don’t take big chances, don’t pursue curative therapies, because we don’t know how to value them.

Paradoxically, both parties — Democrats and Republicans alike — have complained for years about me-too drugs and second and third drugs in the same class. They say they want breakthrough innovation. But the signals they are sending do the opposite: stay in a well-defined space, stay with a mapped patient population, stay where payers can trust incremental progress. That is not to say incremental innovation is bad. Market forces and competition were working so well in the small molecule space that the IRA set the data exclusivity period at nine years instead of thirteen — a sign of how productively competitive that market was.

We want to see companies taking bigger swings. Instead, every policy signal is pushing them toward the familiar — away from new modalities and toward established categories. It is hard to imagine a world where mRNA attracts the investment Moderna required to prove out the platform. Without that environment, we would simply see more conventional small molecules and early-stage biologics.

From a therapeutic area standpoint, cancer and Alzheimer’s have already taken a measurable hit on innovation investment from the IRA. I believe rare disease will be the next. As these MFN deals settle in, they are forcing companies to make difficult choices — even as we have the capital and the scientific capability to invest across all therapeutic areas.