With President Donald Trump expected to deliver a drug pricing order on Monday that Big Pharma and patient groups alike have railed against, the industry’s tumultuous ride is far from over.
The biopharma world has been waiting with bated breath to see what President Donald Trump will do with the Inflation Reduction Act. Next week, we may finally know, as Trump teased in the Oval Office on Monday that a major drug pricing initiative is coming next week.
The IRA has been extremely maligned by the industry, particularly the “pill penalty,” referring to the IRA’s longer period of protection from price negotiations for biologics than for small molecules. The industry contends this penalizes innovation, and Trump has actually shown support for equalizing the two drug classes. At the time, BMO heralded the order as long-overdue “good news from DC.”
But now, the analyst firm is asking: “Can we catch a break?”
That’s because BMO predicts that Trump’s anticipated executive order will direct Health and Human Services to use international drug prices in the negotiations that are already scheduled to happen under the IRA.
Trump has for weeks suggested that he may revive the Most Favored Nations (MFN) rule proposed during his first term in an attempt to bring down costs by linking drug prices in the U.S. to international rates. “We’re being ripped off, as you know, very badly being ripped off compared to the rest of the world,” Trump said of drug prices at the White House this week.
BMO Capital Markets reported that Trump may try to mash the two policies together—the IRA and the MFN. He could use international drug prices as the benchmark for negotiating drug prices under the IRA.
The Centers for Medicare and Medicaid Services has already selected the next round of drugs to undergo negotiations. In a Wednesday note, Leerink Partners flagged many of the companies with drugs subject to the next round of negotiations as specifically being impacted, plus Regeneron, Sanofi and many more. A MFN rule “has potential implications for the entire biopharmaceutical sector,” the firm wrote to investors.
Leerink suggested that Trump could also pursue MFN through a Medicare demonstration or work with Congress to advance legislation to put the rule into place via Medicare. A new law would be a heavy lift, and Trump will likely face legal challenges if he were to push it through, just as he did during his first term.
Indeed, drugmakers are unlikely to let the issue go without a fight. On its Q4 2024 earnings call this week, Takeda warned of the potential impact to industry. “From an industry perspective, if MFN were applied within the Medicaid setting . . . that would be an industry impact over 10 years of up to 1 trillion dollars,” argued Julie Kim, president of Takeda’s U.S. unit. “It would fundamentally be a significant challenge for the overall industry, Takeda included.”
Kim’s comments echoed those of Novartis CEO Vas Narasimhan. Speaking on his company’s Q1 2025 earnings call last week, Narasimhan said the MFN rule “would be devastating to the industry.”
This sentiment was backed up by a new report from No Patient Left Behind arguing that these nations are getting a free ride on U.S. innovation, with value assessments used in countries like Canada and Germany undervaluing innovative medicines by as much as 90%. Indeed, some executives of European pharmas have been pushing for price increases there to incentivize innovation.
“We’re not going to litigate the benefits and drawbacks of the U.S. approach to paying for pharmaceuticals, but generally we believe that countries outside the U.S. pay too little for innovative medicines vs. the U.S. paying too much,” BMO said.
But while Trump failed in the past to push the MFN rule through, the BMO group thinks that this time around, the policy could stick.
And of course, at this point, we don’t even know for sure what the proposal will be. White House Press Secretary Karoline Leavitt foreshadowed the executive order again on Wednesday. “The President will make a big and historic announcement on Monday. Until then, everyone can keep guessing!”
Barrage of Assaults
In addition to the pending drug pricing policy, BMO noted the nomination of wellness influencer, vaccine skeptic and Robert F. Kennedy Jr. ally Casey Means as Surgeon General.
“Experience is paramount; she is not a licensed medical doctor,” the BMO group stated in an investor note early Friday morning. While Means would not have authority over drug approvals directly, she could influence public health, BMO said.
Outside of drug pricing and the Surgeon General, the FDA continues to be in upheaval, with reports this week that an approval for GSK’s Nucala has been delayed. This follows missed target decision dates last month for Novavax’s COVID-19 vaccine and Stealth BioTherapeutics’ Barth Syndrome drug. The loss of some 3,500 FDA staffers could be to blame, former officials and analysts have speculated.
And there is, of course, the continued speculation over tariffs. Trump also hinted on Monday that a proposal could come in the next two weeks.
“Thankfully it’s Friday, as we’re all exhausted with the assault of seemingly bad news for the sector,” BMO wrote.
So rest up over the weekend, biopharma folks. Come Monday, we’re likely in for another tense week.
