Trump order could impact medicines markets and development globally

Allistair Booth of Pinsent Masons, who specialises in life sciences transactions, was commenting after US president Donald Trump signed an executive order designed to ensure that US patients have access to medicines on the basis of so-called ‘most favoured nation’ (MFN) prices.

Currently, each country negotiates medicines prices with manufacturers on an individualised basis. The Trump administration believes what US patients pay for medicines is excessive and that the profits companies generate from the US market go towards subsidising the cost of medicines elsewhere in the world. A move to MFN pricing would mean US patients are charged no more to access medicines than the lowest price medicines manufacturers charge patients in other developed nations.

Under the executive order, Trump has directed the US secretary of health and human services, Robert F. Kennedy Jr, to act within 30 days to “communicate most-favoured-nation price targets to pharmaceutical manufacturers”. Kennedy Jr will subsequently “propose a rulemaking plan to impose most-favoured-nation pricing” if “significant progress towards most-favoured-nation pricing for American patients is not delivered”.

Trump has further ordered Kennedy Jr to “facilitate direct-to-consumer purchasing programs for pharmaceutical manufacturers that sell their products to American patients at the most-favoured-nation price”.

Booth said there was a significant reaction to the executive order from within the pharmaceuticals industry and from financial markets, citing how the share prices of most pharmaceutical companies dropped in the immediate aftermath of announcement before stabilising as analysts weighed whether the order could be implemented.

“If it is implemented, the order will have a significant effect on pharmaceutical companies,” said Booth. “The US is the biggest market in the world for medicines and where significant profits are made.”

“Which products and product markets are included in the scope of the MFN requirements will be important factors in determining the precise impact of the measure. For example, medicines in many EU countries are markedly lower than in the US,” he said.

Booth added: “There could also be a knock-on effect, from the imposition of MFN requirements, on drug development. This is because the value that prospective investors see in medicines R&D will be significantly impacted by a reduction in the financial returns they might realise in the biggest market in the world.”