After numerous meetings with pharmaceutical industry executives this year, the Trump administration's Most Favored Nation (MFN) drug pricing strategy was finally implemented on December 19. That day, the US government announced drug pricing agreements with nine major multinational pharmaceutical companies, including Amgen, Boehringer Ingelheim, Bristol-Myers Squibb, Genentech, Gilead Sciences, GlaxoSmithKline, Merck, Novartis, and Sanofi . These agreements cover a range of aspects, including Medicaid price reductions, internationally aligned pricing for new drugs, and the TrumpRx direct sales channel.

Just months ago, Trump sent formal letters to 17 large multinational pharmaceutical companies, demanding that they lower drug prices in the United States and bring the cost of medicines paid by American patients back to the level of other high-income countries. This was seen as a sign that the United States was pushing for the launch of the Most Favored Nation (MFN) drug pricing system, and now, the signing of nine companies has given this plan its first structured implementation.

Prior to this round of signings, Pfizer, Eli Lilly, AstraZeneca, EMD Serono, and Novo Nordisk had already reached agreements with the government. With this latest signing, 14 of the 17 companies named by Trump have completed negotiations, leaving only Johnson & Johnson, AbbVie, and Regeneron yet to announce an agreement.

The core of this negotiation is not just a price game between the government and enterprises, but a contest of alliances and counter-alliances on multiple levels, including drug prices, medical insurance expenditures, tariff policies, supply chain security, and manufacturing investment .

01
The US government demands: "Taking advantage of the wealthy" is not allowed.

The first requirement the US government placed on the nine pharmaceutical companies in this agreement was to lower drug prices within the Medicaid insurance framework and align them with prices in other high-income countries. Medicaid is a federal and state-run health insurance program for low-income individuals, accounting for about one-tenth of total drug spending in the US, but it covers a wide range of medications, including long-term treatments for chronic diseases and many expensive specialty drugs. This agreement is expected to affect approximately 30%–40% of Medicaid drugs . In terms of price reductions, the White House proposed "drastic price cuts," exceeding even the initial "half price," with some drugs seeing discounts of up to 30% off the list price. Some analysts point out that the Medicaid system already provides substantial discounts, with some drugs seeing combined discounts exceeding 80%.

The second requirement directly targets all future new drug launches. It requires the nine companies to commit that the pricing of all new drugs launched in the US will be consistent with, and not higher than, those in other wealthy countries. Moreover, this requirement applies not only to Medicaid, but also to those covered by commercial insurance, Medicare, and patients paying out of pocket.

The third requirement is to cooperate with the government in establishing a direct sales channel called TrumpRx (TrumpRx.gov), specifically for cash-paying individuals. Merck stated that it will include its diabetes drugs Januvia, Janumet, and Janumet XR in its direct sales system, offering US patients approximately 30% off the original price; if its investigational lipid-lowering drug Enlicitide is approved, it will also be sold through direct sales channels, including TrumpRx. Amgen announced that it will include migraine drug Aimovig and Amjevita (for rheumatoid arthritis) in its direct-to-patient program, with a uniform price of $299 per month, equivalent to a 60%–80% discount from the original price. Sanofi provided an average figure: on average, patients can save approximately 70% on infectious, cardiovascular, and diabetes medications offered through TrumpRx and other direct sales platforms.

Beyond the price itself, the government also included manufacturing and supply chain requirements in the same agreement. Nine companies collectively pledged to invest over $150 billion in research and development and production in the United States, with Merck publicly stating that it alone contributed approximately $70 billion. This investment commitment includes both building or expanding production facilities and transferring or adding some of the production capacity for active pharmaceutical ingredients and key intermediates to the United States, in response to the political debates surrounding the security of the pharmaceutical supply chain in recent years.

Regarding supply security, the agreement includes a more specific clause: some companies will donate a certain amount of active pharmaceutical ingredients (APIs) as part of the U.S. government's strategic reserves. Government officials listed several examples: Merck will provide a large quantity of APIs for the broad-spectrum antibiotic ertapenem; Bristol-Myers Squibb pledged to donate over six tons of APIs or finished products related to Eliquis (apixaban); and GSK will donate APIs related to the bronchodilator albuterol. According to the agreement, these APIs effectively lock in at least six months' worth of potential usage, and in the event of an emergency, the companies are responsible for converting the APIs into final dosage forms to ensure uninterrupted supply.

02
Corporate Returns: The Incentive Policies Behind Them

Although this agreement appears to be a concession made by pharmaceutical companies under pressure, from the perspective of the companies, it may also bring them some substantial benefits, the two most important of which are tariff exemptions and potential regulatory preferences.

In recent years, the United States has consistently used tariffs as a tool for exerting economic pressure on other countries. While the pharmaceutical industry isn't at the center of the trade war like steel or electronics, it has always faced the possibility of being included in the tariff list. For multinational pharmaceutical companies that heavily rely on global supply chains, any change in tariff policy can cause significant disruptions to their budgets and production capacity planning. This agreement explicitly grants companies a three-year tariff exemption , which is seen as the most practical and immediate benefit given the high degree of policy uncertainty. Following the announcement of the agreement, the stock prices of the nine pharmaceutical companies generally rose by about 1% to 3%, with the market widely believing that the temporary relief of the tariff threat was the main reason.

In addition to tariff exemptions, the government also stated it would strive to facilitate regulatory matters for companies participating in the agreement . For example, it would make it easier for companies to obtain FDA priority review status. Priority review means shorter review times, allowing companies to bring products to market faster, resulting in significant commercial value. Merck's lipid-lowering drug, Enlicitide, could potentially benefit from this, gaining access to the Commissioner's National Priority Voucher (CNPV). For pharmaceutical companies, shorter regulatory cycles are often more important than price.

Judging solely from the details of the price reduction, pharmaceutical companies may seem to be being exploited. However, from an industry perspective, the fact that nine companies chose to sign the agreement collectively on the same day is a pragmatic response to industry trends and a result of their unwillingness to bear the political risk of "refusing to negotiate."

First, multinational pharmaceutical companies have realized that the old model of the US drug pricing system is undergoing irreversible changes . The policy direction of Trump's second term is clear: international alignment of drug prices is seen as a political necessity. Companies must accept the reality of slower or even declining price increases in the US in their long-term business planning. Rather than being forced to face greater administrative intervention in the future, they are better off negotiating for controllable price reductions in the current negotiations.

Secondly, Medicaid is not the main source of profit for pharmaceutical companies . Although companies are required to significantly reduce drug prices within the Medicaid system, this system itself accounts for a limited share of total drug sales, and many drugs generate far higher profits in the commercial market than Medicaid. Since this agreement does not mandate price reductions in the commercial insurance market, companies can maintain overall profits through structural adjustments. For example, some companies adjust prices for their blockbuster products when patent protection is about to expire; therefore, the actual financial impact of this agreement is not as significant as it appears on the surface.

Secondly, companies are generally concerned about tariffs and import restrictions . If they refuse to sign the agreement, pharmaceutical companies will not only face political pressure but may also suffer direct disruptions to their supply chains. The potential costs of tariffs far outweigh the losses from Medicaid price reductions, a reality that companies must consider.

Finally, there is a competitive incentive among companies to "sign first and secure their positions." Large pharmaceutical companies like Pfizer and Eli Lilly completed their signings several months ago. This means that companies that sign earlier will have more leverage in subsequent cooperation with the government, while those that delay will be at a disadvantage in negotiations.

In summary, the nine pharmaceutical companies' acceptance of the agreement was not simply a matter of yielding to pressure, but rather a strategic choice to go with the flow.

03
Johnson & Johnson, AbbVie, Regeneron: War or Peace?

After 14 companies, Johnson & Johnson, AbbVie, and Regeneron became the "outliers" in the spotlight.

Trump has publicly stated that all the named companies will eventually reach an agreement, only the timing of the announcement will differ. Reports indicate that these three pharmaceutical companies have confirmed they are in communication with the government and will travel to the White House after the Christmas and New Year holidays to discuss the launch of the TrumpRx platform.

Johnson & Johnson and AbbVie possess extremely large product pipelines in areas such as immunology, oncology, and autoimmune diseases, many of which are key products for US Medicare spending. For example, AbbVie's dethroned king of drugs, Humira, has been one of the highest-spending drugs in the US for many years, and although it faces competition from biosimilars, it still maintains a high market penetration rate. These products naturally become key targets for governments seeking international alignment. Therefore, Johnson & Johnson and AbbVie may need to make commitments regarding more products during negotiations, which makes the process relatively slow.

Regeneron 's situation is different. They primarily focus on high-value biologics, such as innovative drugs in ophthalmology, immunology, and oncology. Their products are expensive, but the total number of patients they reach is relatively limited. Their pricing strategy differs from that of large pharmaceutical companies, so negotiations are likely more targeted than general.

Overall, the reason the three companies haven't signed yet isn't because they've refused, but rather because the negotiation details are more complex. The industry generally expects that with the collective signing of the nine companies, the remaining three will eventually reach an agreement, albeit with adjustments to the structure and terms.

04
Potential impact of most-favored-nation drug pricing on the industry

Nine pharmaceutical companies reached a Fundamental Price Network (MFN) agreement with the US government on the same day. The real change isn't just in the pricing of a few drugs, but in the benchmark for the entire pricing order. Previously, the US largely determined the prices of its new drugs independently, with companies considering how much healthcare and commercial insurance could afford in the US market. Now, companies are required to look at prices in countries like the UK, France, Germany, Italy, Canada, Japan, Denmark, and Switzerland before setting their own prices. In the future, a significant portion of US publicly funded drug prices will no longer be determined by the companies themselves, but rather capped by a net price set by these eight countries.

It's worth noting that while the US and UK reached a zero-tariff agreement, the UK agreed to adjust its drug reimbursement mechanism, raise the long-standing cost-effectiveness threshold, and pledged to "pay a little more" on drug expenditures. At the press conference, Trump interpreted this move as "the first time in 26 years that the UK has been willing to pay more for medicine," and directly stated that he "expects other European countries to follow suit, otherwise he will impose tariffs." This indicates that the US's approach to pushing for MFN (Mandatory Drug Price Response) is not simply demanding concessions from pharmaceutical companies, but rather using tariff threats to force other high-income countries to raise drug prices, so that the price reductions in the US are partially compensated by higher payments from other countries. The UK is the first country to complete this exchange. For multinational pharmaceutical companies, this equates to a new balancing act: lower US prices and higher European prices may not necessarily reduce overall profits, but the composition of profit sources across regions will inevitably need to be adjusted.

For pharmaceutical companies' commercialization models, TrumpRx is more than just adding another drug sales website. The agreement requires almost all signing companies to integrate their flagship products into their direct-to-patient sales systems: Amgen included Repatha, Aimovig, and Amjevita; Genentech offered Xofluza; Gilead provided Epclusa; BMS's Reyataz also participated; and Sanofi anchored its entire insulin line at $35 per month. Many price reductions seem astonishing on the surface: Epclusa dropped from a monthly price of $24,920 to $2,425, Mayzent received an 89% discount, and Plavix dropped from $756 to $16. However, analysts' interpretations reveal that companies often choose to include older products on TrumpRx that have passed their peak, are nearing patent cliffs, or already face generic competition. The utilization rate of cash direct sales channels is also unlikely to be high, far from enough to shake the company's overall revenue structure.

Regulatory incentives are another clear link in the chain of influence. Materials show that on December 19th, the FDA granted Merck two Commissioner's National Priority Vouchers (CNPVs) for the oral PCSK9 inhibitor licitide and the TROP2 ADC sacituzumab tirumotecan. Just days earlier, Johnson & Johnson also received a CNPV based on data from its Tecvayli + Darzalex Faspro third-line multiple myeloma treatment. Going back further, Eli Lilly's oral GLP-1, Novo Nordisk's high-dose semaglutide, and EMD Serono's IVF formulations have all received CNPVs in conjunction with their respective MFNs or price reduction agreements. With these recent issuances, the FDA has issued a total of 18 such priority vouchers, which can reduce the review time from over ten months to one to two months, making them extremely commercially valuable. Although the materials don't explicitly state "price reduction in exchange for vouchers," the connection between the two is implicitly understood. This frequency of coupon issuance is unusual in FDA history, giving the impression that the US is using regulatory time as a key bargaining chip in drug price negotiations.

This round of MFN (Made for Drugs, No. 5) drug price negotiations is not the end, but rather a prelude. After announcing the signing of agreements by nine pharmaceutical companies, Trump explicitly targeted insurance companies next , believing they "earn far more than they deserve" in the drug pricing system. He stated he would meet with insurance companies to drastically reduce premiums. In a more radical move, he mentioned an alternative approach: directly paying individuals with "hundreds of billions, trillions of dollars" that would normally be paid to insurance companies, forcing insurance companies to lower prices while retaining their role in the system. Although he refused to answer any specific details, one thing is certain: this round of MFN agreements surrounding pharmaceutical companies in 2025 is only the first step in the restructuring of the US drug payment system; the next step will inevitably extend to the insurance sector. For the multinational pharmaceutical companies that have already signed the MFN agreements, the choice to side with the government or the other has been made, and the effects will gradually become apparent in the coming years.

05
After Pandora's box was opened

The months-long MFN price negotiations, involving over a dozen multinational pharmaceutical companies, showed signs of concluding at the end of 2025. The US has established an unprecedented linkage mechanism between drug prices, tariffs, supply chains, and regulatory incentives. Companies chose to enter this framework both to avoid more unpredictable policy risks and to secure a position of certainty in a redefined competitive environment. From this perspective, December 19th is not a single event, but rather the beginning of a long-term cycle. Regardless of how much drug prices ultimately decrease, how cross-border market price alignment evolves, how the US continues to address insurance issues, or where supply chain policies will go, these questions will continue to resonate in the coming years. As the MFN mechanism enters its substantive implementation phase, the boundaries, rules, and power structure of the US drug pricing system will take on a new look.

At the end of 2025, when Pandora's box is opened, what exactly will be released besides the hope inside remains to be seen and will require people to observe with bated breath.

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