Impact of U.S. Administration Pharmaceutical Policies: MFN Pricing and Tariff Exemptions Reshaping Global Drug Pricing and Supply Chains

Against the backdrop of an accelerating transformation in the global pharmaceutical industry, policy variables are becoming critical factors influencing drug pricing systems, supply chain structures, and cross-border distribution. As an important bridge connecting Chinese innovation with global medical demand, DengYueMed (Hong Kong DengYue Pharmaceutical Co., Ltd.) continues to monitor international pharmaceutical policy developments and their far-reaching implications for global drug accessibility.

Since 2025, the second Trump administration has reshaped the core framework of U.S. pharmaceutical policy through a series of executive orders and trade measures. Its two central pillars—the Most Favored Nation (MFN) pricing mechanism and tariff adjustments on patented drugs—aim to reduce drug prices in the United States, decrease external dependence, and strengthen domestic supply chains.

These policies operate under an incentive–penalty framework: pharmaceutical companies that agree to MFN pricing and commit to U.S.-based manufacturing investments are granted tariff exemptions and policy support; those that do not comply face import tariffs of up to 100% and increased market access pressure.

This policy design not only directly impacts domestic drug pricing and manufacturing in the U.S., but also reshapes global pricing linkages and supply chains, significantly influencing multinational pharmaceutical business models, innovation returns, and the global expansion strategies of Chinese pharmaceutical companies.

1. Core Mechanisms of MFN Pricing and Tariff Exemptions

On May 12, 2025, President Trump signed the executive order “Delivering Most Favored Nation Prescription Drug Pricing to American Patients”, requiring pharmaceutical companies to benchmark U.S. prices for single-source branded drugs against the lowest price among OECD countries with at least 60% of U.S. GDP per capita.

The U.S. Department of Health and Human Services (HHS) subsequently issued specific pricing targets and promoted direct-to-consumer purchasing channels (e.g., TrumpRx.gov).

By the end of 2025, more than 16 major pharmaceutical companies—including Pfizer, Eli Lilly, Johnson & Johnson, and AstraZeneca—had signed voluntary agreements to provide MFN-level pricing in Medicaid and cash-pay segments.

In return, these companies receive:

• Tariff exemptions (0%) through 2029
• Greater policy certainty
• Incentives for domestic investment

In April 2026, the U.S. invoked Section 232 of the Trade Expansion Act of 1962 to impose tariffs of up to 100% on patented drugs and APIs, with differentiated policies:

• MFN + localization commitments: 0% tariff
• Localization only: 20% gradually increasing to 100%
• EU, Japan, South Korea, Switzerland: ~15% tariff
• Generics and biosimilars: temporarily exempt

This framework effectively links drug pricing, trade policy, and national security objectives, using policy leverage to guide corporate behavior.

2. Accelerated U.S. Localization Investments by Pharma Companies

Following the policy rollout, global pharmaceutical companies rapidly adjusted their strategies, triggering a new wave of “Made in America” investments.

In 2025 alone, total committed investments reached $370–480 billion, focusing on:

• API localization
• Sterile injectables and biologics manufacturing
• R&D centers and advanced production facilities

Representative investments include:

• Johnson & Johnson: $55 billion
• Roche/Genentech: $50 billion
• AstraZeneca: $50 billion
• Eli Lilly, Pfizer, Novartis, Sanofi: tens of billions each

This trend highlights a clear pattern under the incentive–penalty framework:

Investing in the U.S. to gain policy certainty and mitigate trade risks

In the short term, this leads to higher capital expenditure and inventory adjustments; in the long term, it drives structural supply chain transformation.

3. Impact on Global Drug Pricing: Convergence and Restructuring

The MFN mechanism directly targets the high-price structure of the U.S. pharmaceutical market (typically 2–3 times higher than other developed countries), with expected price reductions of 30%–80% for certain drugs.

Global implications are mixed:

Positive effects:

• Reduces the “U.S. subsidy” for global pharmaceutical innovation
• Encourages higher healthcare spending in other countries

Potential risks:

• Delayed launches in low-price markets
• Adjustments in discount structures or market withdrawals
• Emergence of a global “price ceiling effect”

Overall, prices are likely to converge in the short term, while long-term outcomes depend on how pharmaceutical companies rebalance global markets.

4. Supply Chain Impact: Trade-offs Between Efficiency and Security

Currently, the U.S.:

• Imports ~53% of finished drugs
• Has only ~15% domestic API production capacity

It relies heavily on China, India, and Europe.

Key impacts include:

1. Accelerated restructuring

• Reshoring of APIs and key intermediates
• Localization of manufacturing systems

1. Short-term risks

• Rising costs
• Potential supply disruptions
• Price volatility

1. Buffer mechanisms

• Temporary exemption for generics
• Transition period for compliant companies until 2029

In the long run, supply chain resilience improves, but global efficiency may decline, with higher costs potentially passed on to patients.

5. Impact on Innovation: Reduced Returns and Structural Adjustment

The U.S. accounts for 64%–78% of global pharmaceutical profits, making it the primary driver of innovation funding.

Potential impacts of MFN policies include:

Downside risks:

• R&D spending could decline by ~18.5%
• Fewer clinical trials
• Reduced number of new drug approvals

Industry responses:

• Increasing prices in other markets
• Adjusting global launch strategies
• Expanding licensing and partnerships
• Focusing on high-value therapeutic areas (oncology, rare diseases)

Overall, while the policy promotes a “fair share” model globally, it also challenges the sustainability of innovation incentives.

6. Implications for Chinese Pharma Global Expansion

China’s position in the global pharmaceutical industry:

• Largest API supplier globally
• ~20% share of global innovative drug pipelines

Policy impacts include:

Challenges:

• Tariff barriers limiting exports
• Reduced CDMO/CXO demand
• Restrictions from policies like the BIOSECURE Act

Structural shifts:

• Expansion into Europe and emerging markets
• Acceleration of domestic innovation capabilities
• Increased focus on intellectual property

Potential opportunities:

• Greater global share if U.S. innovation slows
• Rebalancing of global industry chains

Conclusion: A Policy-Driven Restructuring of Global Pharma

Through MFN pricing and tariff measures, the Trump administration has established a pharmaceutical policy framework centered on incentives and constraints, achieving multiple goals including price control, supply chain reshoring, and national security.

However, this framework also introduces structural challenges, including global price linkage, compressed innovation returns, and reduced supply chain efficiency. The global pharmaceutical industry is shifting from a market-driven to a policy-driven paradigm.

In this evolving landscape, Chinese pharmaceutical companies face a critical transition—from export-driven growth to diversified global strategies and innovation-led development.

As a platform specializing in cross-border pharmaceutical supply and global resource integration, DengYueMed leverages compliant channels, global procurement networks, and supply chain management capabilities to help healthcare providers and patients secure stable and accessible drug supply in an increasingly uncertain environment. As international pharmaceutical regulations continue to evolve, companies with strong global coordination capabilities will play an increasingly vital role in shaping the future industry landscape.