Read our Therapeutics Market Update for our insights on the sector this quarter.

In our view, the pharma industry needs to ‘double-down’ on organic and inorganic innovation to navigate a challenging marketplace. There is a looming “patent cliff” with the top 20 biopharma companies collectively facing as much as $180 billion of potential revenue headwind over the next five years. Also, with the election of President Trump, we see an ongoing effort to put downward pressure on drug pricing, building on recent legislation such as the Inflation Reduction Act (IRA). In our view, any pressure on Medicare (and Medicaid) pricing could have a ‘ripple’ effect on commercial pricing.

Key Takeaways

• President Trump issued an executive order to implement a “Most Favored Nations” (MFN) policy as part of a broader effort to reduce drug prices. The executive order seeks to align prices for drugs in the U.S. to the lowest prices paid in other countries. Unlike Trump’s first failed attempt to implement MFN in 2018, which solely addressed drugs covered under Medicare Part B, the current attempt addresses drugs across all payer categories, including private coverage.

• Also, the Trump administration issued an executive order calling for the advance of legislation to eliminate the so-called “pill penalty” in the Inflation Reduction Act (IRA). As currently written, the IRA financially disadvantages small molecule drugs making them subject to Medicare negotiations only nine years after approval (vs 13 years for biologics). Earlier this year, the Ensuring Pathways to Innovative Cures Act was introduced in Congress to close this four-year gap.

• Finally, the U.S. Department of Commerce announced the start of a Section 232 investigation into how the importing of pharmaceuticals might negatively impact “national security.” This will lead to a set of policy recommendations, which will be given to the President within 270 days. These recommendations could include the implementation of tariffs and trade restrictions, among other things.

We hope you find this information valuable. If you’d like to discuss further, please reach out to our Research team.

Compare to our Q3 2024 Pharma Market Update here.