Extended Most-Favored-Nation Principle Through Medicaid
With these new contracts, nine medium-sized companies are joining the U.S. government’s initiative: Alcon, Astellas, BeOne Medicines, BridgeBio, CSL, Kyowa Kirin, Sun Pharma, Teva Pharmaceuticals, and UCB. Approximately 11 months after the first agreement was signed with Pfizer, 26 companies have now signed such agreements. According to the U.S. government, these manufacturers together account for about 90 percent of the domestic pharmaceutical market.
The basic principle of Most-Favored Nation (MFN) status is as follows: Drug prices in the U.S. are tied to the lower price levels of other industrialized nations. Unlike the agreements with the 17 major pharmaceutical companies—including Novo Nordisk, Eli Lilly, and Regeneron—distribution commitments through the government discount platform “TrumpRx” or exemptions from pharmaceutical tariffs do not apply to the nine mid-sized manufacturers. Instead, the companies committed to MFN prices for medications purchased through state Medicaid programs for low-income citizens.
"You have no choice."
U.S. President Trump"That's because 'we now have agreements with 26 companies that cover 90 percent of the market, and the remaining 10 percent will join as well,'" Trump said at a press conference.
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Projected Savings: Reservations
Citing the Council of Economic Advisers, the U.S. government estimates savings of $600 billion over the next ten years. However, independent industry experts are cautious in their assessment of these figures. They attribute the decline in drug prices primarily to the Medicare negotiation program in the Inflation Reduction Act, which was passed under Joe Biden’s predecessor’s administration. Furthermore, the exact scope of the current contracts is unclear, as—with a few exceptions—it has not yet been disclosed which specific drugs are covered by the Medicaid discounts.
Location Guarantees
In addition to the price commitments, the agreement includes commitments to invest a total of $19.6 billion in the expansion of U.S. infrastructure. Together with earlier agreements, the government estimates the total value of the promised production relocations at $668 billion. Representatives of the participating pharmaceutical companies explained the reasons for these steps as part of the announcement:
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- BeOne Medicines: CEO John Oyler announced that the company would provide a cancer drug to Medicaid “at a significantly reduced price.” In addition, the company plans to invest nearly $11 billion in U.S. research and production through 2029, including $300 million for the expansion of a facility in New Jersey.
- UCB: CEO Jean-Christophe Tellier referred to the $2 billion expansion of a manufacturing facility in the state of Georgia and emphasized that this represented “the largest production investment our companies have ever made.”
- CSL: Julie Schiffman, Senior Vice President of Market Access, announced a $1.5 billion investment in Illinois to enable “uninterrupted production of therapies derived from blood plasma.”
- Kyowa Kirin: Steve Schaefer, the group’s president for North America, announced a fundamental realignment of the company’s supply chain. While currently only 5 percent of the company’s drugs manufactured in the U.S. are distributed to U.S. patients, “within the next two years, more than 95 percent of the drugs manufactured in the United States will be destined for American patients.”
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Donations of active ingredients for the national emergency reserve
As part of the MFN agreements, four of the manufacturers donate specified quantities of active pharmaceutical ingredients to the national SAPIR (Strategic Active Pharmaceutical Ingredients Reserve):
- UCB is providing 163 metric tons of the anti-epileptic drug levetiracetam (brand name Keppra).
- Sun Pharma is supplying the antibiotics clindamycin (71.4 metric tons) and doxycycline (6.75 metric tons).
- Teva Pharmaceuticals is donating 45 metric tons of the antibiotic metronidazole and 4.8 metric tons of the blood pressure medication amlodipine.
- Astellas is contributing 25 kilograms of the immunosuppressant tacrolimus to help prevent organ rejection.
