US pharma MFN and tariff dynamics: What EU and UK leaders need to know

Key takeaways

• US MFN rules and new tariffs are narrowing the US–ex-US price gap and drawing more manufacturing and capital investment toward the United States.
• Low European or UK list prices now directly affect US revenue, prompting companies to rethink launch sequencing, visible discounts, and list–net price strategy.
• Tariffs and US industrial incentives are reshaping global manufacturing footprints, with high-value, trade-exposed products increasingly supporting US expansion and pushing Europe and the UK to compete on specialisation and policy agility.
• EU and UK manufacturers and policymakers that adapt external reference pricing (ERP) and health technology assessment (HTA) and access frameworks will be better positioned to retain investment, secure timely launches, and reduce the risk of supply disruption.

As the United States reactivates Most-Favoured-Nation (MFN) pricing and introduces new tariffs on selected branded medicines, Europe and the United Kingdom are entering a period of direct exposure to US policy choices. These shifts are compressing the traditional transatlantic price gap, altering launch strategies, and reshaping global competition for manufacturing investment.

For EU and UK leaders, the implications are significant and immediate.

The old status quo

For decades, the transatlantic pharmaceutical system rested on predictable norms. The US accepted higher prices in exchange for early access and a strong industry base, while Europe and the UK relied on external reference pricing (ERP) and health technology assessment (HTA) to negotiate favourable visible list prices. Trade policy reinforced this equilibrium through the “zero-for-zero” framework, which enabled tariff-free movement of medicines and allowed pricing strategies and supply chains to develop largely independent of trade frictions.

Early signs of disruption appeared during the first Trump administration, which attempted to implement an MFN policy to curb US prescription drug prices before it was halted by federal courts. The period also saw Section 301 tariffs applied to imports from China, including certain pharmaceuticals, signalling that products previously untouched by trade measures could be drawn into broader instability.

These developments have accelerated in 2025 under the second Trump administration, which has revived the MFN framework and introduced new tariffs on selected branded imports from developed markets. A parallel Section 232 investigation has added further pressure by examining whether pharmaceutical imports pose a national security risk, a process the administration is using to shape negotiations on baseline tariffs. Together, these actions are aimed at narrowing the US–ex-US price gap and steering investment toward the United States.

MFN: A domestic policy with global consequences

MFN pricing now requires Medicare to reimburse at the lowest available global price for a given product. This creates a direct link between EU or UK list prices and US revenue. A single low ex-US list price can anchor the US reimbursement benchmark, compress US margins, and restrict future price increases.

Manufacturers are already adapting. Three patterns are emerging:

1. Tighter control of EU and UK list prices

Visible list prices are being set more conservatively. Companies that previously used steep, visible discounts to achieve access are shifting toward more discreet approaches.

2. Greater reliance on confidential mechanisms

Rebates, outcomes-based agreements, and commercial access arrangements are becoming the preferred path to affordability. These tools protect net prices while keeping visible list prices above US MFN thresholds.

3. More deliberate launch sequencing

Firms are either establishing US pricing before ex-US launches or aligning launches across markets to prevent low early prices from feeding directly into MFN calculations. Pricing governance is becoming global, rather than regional.

The cumulative effect is a more coordinated pricing architecture, where US policy shapes decisions once made independently in Europe and the UK.

Tariffs: A new cost and supply chain variable

Tariffs amplify MFN exposure by reshaping the economics of cross-border trade. While generics and most APIs remain at low or zero duty levels, selected branded imports are now subject to higher landed costs unless manufacturers negotiate exemptions or secure bilateral arrangements.

Three consequences are becoming increasingly visible.

1. Investment shifts toward the US

High-value, trade-exposed products are strong candidates for expanded US manufacturing and packaging capacity, particularly when combined with state or federal incentives.

2. A repositioning of European and UK manufacturing

Sites in Europe and the UK can still compete, but increasingly on the basis of specialist capabilities, scientific ecosystems, or co-funding support, rather than cost advantage.

3. Greater fragility in transatlantic supply chains

As companies realign production or prioritise US volumes, Europe and the UK are more exposed to episodic constraints, slower replenishment cycles, or rerouting of supply through tariff-advantaged pathways.

These pressures are most acute for biologics, sterile injectables, and products with complex temperature or packaging requirements.

How leading companies are adjusting strategy

Managing MFN headroom

Amgen and Eli Lilly have leaned on carefully calibrated list-price actions paired with confidential discounts to maintain MFN flexibility while supporting payer affordability.

Controlling visible price anchors

Pfizer’s arrangements with the US government place greater weight on managing EU and UK reference points to preserve US pricing integrity.

Sequencing launches with greater discipline

Novartis has emphasised smaller, more deliberate list-price steps and tighter coordination across markets, reducing the likelihood of low prices circulating into MFN baskets.

Reassessing investment plans

Merck (MSD outside North America) has adopted more stringent internal thresholds for European investment, prioritising projects tied to US supply resilience or supported by robust local incentives.

The recent UK experience with Mounjaro is a prime example. An anticipated 170% list-price increase ultimately translated into a commercial access agreement, rather than a simple list-price reset balancing MFN considerations, National healthcare Service (NHS) affordability, and the need to maintain supply. Interventions of this type are likely to become more common as MFN exposure and tariff-driven costs bite.

Implications for Europe and the UK

MFN and tariff dynamics are no longer distant US policy considerations: they are active forces reshaping pricing, market access, and industrial strategy across Europe. These policies are driving noticeable shifts in how pharmaceutical companies plan launches, manage pricing, and allocate investment.

Manufacturers are facing upward pressure on visible list prices, as they work to avoid being the lowest comparator in MFN reference baskets. To balance these higher list prices, companies are increasingly relying on managed-entry agreements, risk-sharing arrangements, and other commercial access strategies that link value to outcomes for payers. At the same time, launch strategies are becoming more selective and staggered, particularly for marginal indications or late-line settings, to prevent low early prices from feeding back into MFN calculations.

The ripple effects extend to investment decisions as well. Projects that once defaulted to European sites are now being benchmarked against US-centric incentive packages and tariff exposure, heightening competition for inward investment. Altogether, these trends are gradually compressing the US–Europe list-price gap and shifting the manufacturing “centre of gravity” toward the United States for selected high-value, trade-exposed products.

Strategic priorities for manufacturers and policymakers

To navigate the new environment, companies need to strengthen global coordination and protect US pricing integrity while maintaining flexibility in Europe and the UK. Recommended priorities include:

• A disciplined approach to list-price setting, with clear guardrails around how low European prices can go without jeopardising MFN economics
• Deliberate launch sequencing and cross-regional governance so that pricing, access, and tariff decisions are made from a single playbook
• Strong access-contracting capabilities, particularly in outcomes-based and commercial access agreements that can reconcile higher list prices with payer constraints

In a landscape increasingly shaped by US incentives, EU and UK governments must position themselves as reliable partners for pharmaceutical investment. Achieving this requires a multifaceted approach.

Faster permitting and streamlined planning pathways for strategic manufacturing facilities can help ensure Europe remains a viable location for high-value production. Targeted incentives that reward availability, resilience, and diversified sourcing are essential to attract and retain investment.

At the same time, health technology assessment (HTA) and external reference pricing (ERP) processes must become more agile, maintaining payer discipline without unintentionally setting low MFN price anchors that could erode global revenues.

Ultimately, closer alignment between industrial policy and market access strategies will be critical for Europe and the UK to remain competitive in a world where the US increasingly drives the rules of engagement.

An example of this is the US-UK Economic Prosperity Deal announced at the beginning of December, wherein UK-origin pharmaceutical products are exempt from US tariffs, in exchange for the UK committing to increased National Health Service spend for new medicines. The aim is to remain competitive for investment while safeguarding timely patient access.

Looking ahead in 2026

The durability of current shifts will depend on the breadth of MFN agreements, the evolution of tariff schedules, the role of Direct-To-Consumer prescription flows, and the trajectory of European list prices. Supply chains may also reveal pinch points as capacity relocation continues.

One point is clear. MFN and tariff policy are reshaping the transatlantic competitive balance. Companies that map their exposure, test alternative scenarios, and realign pricing, access, and manufacturing strategies will be best placed to convert policy disruption into strategic advantage.

About the authors

Ivo Carre, PhD, is a senior business analyst at Lifescience Dynamics in London, with a doctorate in Neuroscience from the UKDRI and over two years of biopharma consulting experience. He has supported various clients across several indications, including oncology, neurology, and rare diseases, with expertise in competitive intelligence, market research, and market access.

Jaehyuk Lee, MSc, is a senior business analyst at Lifescience Dynamics, specialising in oncology. He has supported clients across GYN and breast cancers, pan-tumour indications, GI and GU cancers, and B-cell malignancies. His expertise in competitive intelligence, market research, and market access helps clients evaluate portfolio opportunities and guide corporate strategy.

Dr Kasia Koczula is an engagement manager at Lifescience Dynamics, with over eight years of experience in life sciences consulting. She holds a PhD in Haematological Oncology and has led engagements across a broad spectrum of therapeutic areas, including oncology, cardiovascular diseases, and rare diseases. Dr Koczula specialises in competitive intelligence, market research, and strategic advisory services. She is dedicated to delivering impactful, data-driven insights that empower clients to make strategic, informed decisions.