BioPharma, Pharma

Pfizer Reaches Deal on Most-Favored Nation Drug Pricing; Other Pharmas Expected to Follow

Newly launched Pfizer drugs will be priced at parity to prices in comparable developed nations, according to the most-favored nation pricing agreement. But industry observers note that big pharma companies are also raising some prices overseas as part of a strategy to protect U.S. revenue.

Pfizer is the first big pharmaceutical company to reach an agreement with the Trump administration over most-favored nation drug pricing, a deal that lowers U.S. prices of certain medications and makes them available directly to patients through new online channels. The agreement announced Tuesday also gives Pfizer a grace period before facing potential tariffs on its drugs.

With most-favored nation pricing, the prices of a drug in the U.S. will be matched to the lowest price of the same drug in a comparable developed nation. President Trump revived the policy in a May executive order. In July, he sent letters to CEOs of 17 big pharma companies outlining ways he wanted them to comply with the order. That letter gave companies until Sept. 29 to respond.

In a Tuesday news conference with the Trump administration, Pfizer executives said the company will participate in TrumpRx.gov, a new purchasing platform that will allow Americans to purchase most primary care treatments and certain specialty drugs from Pfizer “at a significant discount.” A White House fact sheet listed some examples of existing Pfizer products: an 80% discount for atopic dermatitis drug Eucrisa; a 40% discount for immunology drug Xeljanz; and a 50% discount for migraine drug Zavpret.

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Specific terms of the agreement remain confidential. But the White House said the agreement means every state Medicaid program in the country will have access to most-favored nation drug prices on Pfizer products. Furthermore, the agreement secures most-favored nation pricing on all new drugs Pfizer brings to the market.

As the deadline for a response to Trump’s most-favored nation proposal approached, pharma companies rolled out initiatives that could help them meet the goals outlined in the executive order. That order specified that selling directly to patients would be one way to comply, as long as the prices offered through these channels was no higher than the best prices in other developed nations. Last week, Bristol Myers Squibb announced a new direct-to-patient website will launch in January with the plaque psoriasis drug Sotyktu as the first product offered at a steep discount. AstraZeneca, Novartis, and Boehringer Ingelheim have since unveiled their own direct-to-consumer online plans. Industry trade group PhRMA also announced a new website that will connect U.S. consumers with the direct-purchase programs of drug manufacturers.

Another move taken by some companies is raising prices on drugs sold overseas. Earlier this month, BMS said schizophrenia drug Cobenfy will launch in the United Kingdom at a price equal to the drug’s U.S. list price. That followed Eli Lilly’s August announcement it had reached an agreement with the U.K. to raise the price of type 2 diabetes drug Mounjaro. Lee Brown, global sector lead, health care, at consultancy Third Bridge, said this strategy addresses a Trump argument that other nations are “freeloading on American pharmaceutical innovation,” as stated on White House fact sheets. This strategy also gives pharma companies a way to protect their revenue in the U.S., their biggest market.

“I think [pharma companies] raise some prices to offset some price reductions in the U.S.., and they do that for a selected number of drugs, and they deliver those as wins to the Trump administration,” Brown said in an interview. “Trump will take that as a win. That’s the way he works. He’s not really looking for everything. He’s looking for some things that he wouldn’t have gotten.”

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In a note sent to investors, Leerink Partners analyst David Risinger said there is now a framework for other countries to absorb higher prices than they have in the past for new drugs. He added that Pfizer anticipates this opens up a way of introducing new drugs at list prices overseas consistent with U.S. list prices. But Leerink does not expect the prices of existing drugs to be raised outside of the U.S. because of the economic challenges of doing so.

Trump has also threatened to impose tariffs on pharmaceuticals. Section 232 of the Trade Expansion Act permits tariffs if a U.S. Department of Commerce investigation finds they are necessary for national security. That rationale has already been used to justify tariffs on aluminum and steel imports. The investigation on pharmaceuticals is ongoing. But Pfizer said its products under a Section 232 inquiry won’t face tariffs for three years as long as the company invests in its U.S. manufacturing. In the past year, big pharma companies have unveiled multi-billion-dollar capital investment plans for the U.S., the most recent one GSK’s plan to spend $30 billion on U.S. manufacturing and R&D sites over the next five years. That announcement was made while Trump was in the U.K. on a state visit.

William Blair analyst Matt Phipps said in a research note that it remains to be seen whether companies will need to provide drugs directly to patients via TrumpRx.gov or through their own programs. It’s also unclear how these new options will affect prices of drugs for the Department of Veterans Affairs or Medicaid.

“The majority of large biopharma companies have already announced large commitments to invest in manufacturing and R&D facilities in the United States,” Phipps said. “Following today’s announcement, we expect more companies will announce direct-to-consumer channels to further appease the Trump administration and largely remove threats of 100% tariffs and 1,000% price reductions.”

Photo: Mandel Ngan/AFP, via Getty Images