Tariffs and MFN Policy Power a Broad, Confusing Pharma War

In May 2025, the White House announced a new Most-Favored-Nation (MFN) policy, directing pharmaceutical companies to cut U.S. drug prices to match the lowest prices in other developed nations, with compliance expected within 60 days or the threat of federal intervention3 5.

President Trump warned of potential tariffs up to 250% on imported pharmaceuticals, aiming to force drug manufacturing back to the U.S. and to reinforce the MFN policy. The policy environment is marked by heightened uncertainty for the industry2.

Seventeen major pharmaceutical companies, including Eli Lilly, Pfizer, and Johnson & Johnson, received official directives to lower prices and ensure U.S. prices do not exceed those in any other developed country3 5.

The MFN order mandates that drug companies must not offer better prices to other developed nations and encourages direct patient sales, provided U.S. prices are no higher than international MFN levels3.

Analysis suggests tariffs could modestly push drug prices higher in the U.S. (especially for generic drugs and imports from India and Europe), may lead to some branded drugs being produced domestically, but likely would not onshore generic manufacturing due to thin profit margins4.

The combination of MFN pricing and tariff threats places substantial pressure on pharma balance sheets and could shift investment away from innovation, as returns on high-cost R&D become less predictable1.

Administration communications signal readiness to use all available tools—including regulatory, trade, and direct policy—in pursuit of lower drug prices for Americans, raising questions about supply chain stability, global pharma relations, and long-term effects on drug innovation1 3.