Currently in June 2025, the Trump administration introduced a significant shift in U.S. drug pricing policy through the implementation of a "Most Favored Nation" (MFN) rule. The initiative aimed to address the longstanding issue of high prescription drug prices by benchmarking certain Medicare drug payments to the lowest price paid by comparable countries. While designed with consumers in mind, this policy raises complex implications for the biotech and pharmaceutical sectors, both immediately and over the long term.
The blog post below provides some potential impacts of the MFN policy on the biotech and pharma industry of which a project and program manager in this industry should be aware.
1. Revenue Compression from Price Benchmarking
The MFN model mandates that Medicare Part B reimbursements reflect the lowest price paid in reference countries such as Germany, Canada, and the United Kingdom. U.S. prices for biologics are often 2–4 times higher than in these countries, so the policy could result in drastic price reductions for high-revenue drugs.
Impact:
Manufacturers of top-selling biologics stand to lose billions in Medicare reimbursements in the US market.
Reduced revenue could lead to tightened margins, especially for firms heavily reliant on a few flagship products with a significant amount of revenue from US sales.
2. R&D and Innovation Investment Threatened
A large share of global pharmaceutical R&D spending originates in the United States. High drug prices, while controversial, are a key source of capital fueling biotech innovation.
Impact:
Smaller biotech firms may face greater difficulty securing funding or commercializing early-stage products if expected profit margins shrink.
Venture capital may shift toward less risky sectors or demand greater returns, increasing cost-of-capital for startups.
3. Disincentive for Launching New Drugs in the U.S. First
The traditional drug launch model was a US-first approach with pricing in the US typically higher than subsequent ex-US launches to capture early market share in the US where there has historically been a higher capacity to charge higher prices due to the Medicaid, Medicare, and US health insurance coverage differences that other countries do not have. Under MFN, launching a drug in a lower-price country first could put downward pressure on the price the U.S. will later pay impacting revenue models and "pay back periods" that companies use to valuate when a product will break even and recoup research and development costs.
Impact:
Companies may delay U.S. launches to prevent early low prices in other countries from influencing U.S. reimbursement rates.
Patients in the U.S. may experience delayed access to cutting-edge therapies.
4. Administrative and Legal Challenges
The MFN rule faced legal pushback from industry groups (e.g., PhRMA and BIO), claiming it exceeded CMS authority and sidestepped public comment periods.
Impact:
Legal uncertainty created regulatory ambiguity for business planning.
Even the prospect of MFN-like models in future administrations adds a layer of risk and complexity to pricing strategy.
5. Global Repricing Dynamics
If U.S. pricing gets tethered to global markets, there could be ripple effects. Manufacturers may push for higher prices abroad to avoid triggering lower MFN benchmarks in the U.S.
Impact:
May strain international pricing negotiations, particularly with single-payer systems in Europe.
Could provoke regulatory or diplomatic friction, affecting global market access strategies.
6. Strategic Shifts in Market Access and Portfolio Composition
Pharma companies may adjust portfolios to emphasize drugs less vulnerable to price controls—e.g., generics, orphan drugs, or products outside Medicare Part B.
Impact:
May lead to increased investment in niche therapeutic areas with higher pricing flexibility.
Could accelerate the shift toward cell and gene therapies, which are harder to price-compare internationally due to their novelty.
In summary
The MFN policy marked a radical shift in U.S. drug pricing strategy, one that challenged traditional industry assumptions. While its implementation faced delays and legal challenges, the policy signaled a broader trend toward price benchmarking and international alignment in drug pricing.
For biotech and pharmaceutical firms, the MFN rule was both a wake-up call and a strategic inflection point. Even if not fully implemented, the possibility of future administrations revisiting similar models suggests that companies must begin adapting to a world where U.S. price autonomy is no longer guaranteed.
Key Strategic Considerations:
Diversify revenue beyond Medicare Part B-heavy portfolios.
Reevaluate global launch sequencing strategies.
Strengthen payer and government relations capabilities.
Model R&D pipelines with more conservative revenue assumptions.
As policy landscapes evolve, the biotech and pharma industries will need to continue balancing innovation incentives with increasing global pressures for price accountability.
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