The Unique Considerations Mid-Sized Pharma Companies Face When Making 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: What are the unique considerations for MFN deals with mid-sized pharma companies?
John Stanford: The first thing to remember is that “mid-sized company” is a broad definition, so I want to be careful not to paint with too broad a brush. But mid-sized pharmaceutical companies are constrained in two ways that iconic manufacturers — a Pfizer, a Merck — are not.

The first constraint is that they simply have fewer products on the market. To the extent we saw details from the initial deals with large manufacturers, those agreements applied to specific products. When you have 30 or 40 products on the market, you have more margin to give on specific products, and you can tailor deals to what is most advantageous to you while still ceding some ground to the administration. But when you only have one or three products, you cannot absorb a 20 to 30 percent margin hit in the same way.

That brings us to the second constraint: capital. Something large companies have — in this industry and others — is access to substantial, low-cost capital. Mid-sized biopharmaceutical companies do not necessarily have that luxury. They may need all of their revenue to fund what comes next in their portfolio and pipeline, and they do not have the same access to Wall Street and public markets to tap into alternative sources of capital.

Both of those factors — capital constraints and a smaller product portfolio — are why the MFN equation looks entirely different for mid-sized companies than it does for the industry’s largest players.