By David Wainer
Americans pay about three times what other wealthy nations do for branded prescription drugs. For years, policymakers have tried to fix this by cutting U.S. drug prices directly. President Trump has pushed a different idea: make foreign countries pay more so Americans can pay less.
For Big Pharma, there is potential upside. But it is easier said than done.
Last year, after threatening the industry with crushing tariffs, Trump secured several commitments. The most important one: Drugmakers agreed to charge the U.S. no more than what other wealthy countries pay for newly launched medicines, as part of a policy known as "most favored nation," or MFN.
On paper, it makes sense. If American prices are tethered to what the U.K. or Switzerland pays, drugmakers would need to raise prices abroad and lower them in the U.S. to balance things out. But the reality is messier. How do you persuade cash-strapped governments to write bigger checks to an industry they already resent? And will pharma companies actually lower U.S. prices, or simply pocket the gains from charging Europe more?
What is clear is that pharmaceutical executives are eager to seize the moment. They now have leverage that was lacking in the past, including the full backing of U.S. trade representatives and the Commerce Department. The U.K. has already agreed to increase what it pays for medicines as part of a wider trade deal with the Trump administration. Germany and Switzerland are signaling greater openness on the issue as well.
"I think it is important that people understand that countries need to pay and invest their fair share for the innovation that helps their citizens," Teresa Graham, chief executive of Roche's pharma division, said in an interview.
America is an outlier among wealthy nations, partly because of its private healthcare system. Across the world, governments leverage their power as single buyers to negotiate lower drug prices. The U.S. could theoretically wield the most negotiating power and secure low prices. Instead, it leaves negotiations to a patchwork of players. Former President Joe Biden's signature drug-pricing law for the first time allowed the government to directly negotiate Medicare prices, but only for a handful of older medications.
Trump wants to leverage U.S. government power, but indirectly. Speaking at Davos, he claimed his MFN policy would slash U.S. prescription costs by forcing other countries to raise theirs. He recounted threatening French President Emmanuel Macron with tariffs on Champagne and swiftly getting France to raise prices on an unspecified drug. (The Élysée Palace denied the claim on X, noting that prices are "regulated by the social security system.")
Now, Trump's recent threats to place tariffs on European countries over Greenland could make them less inclined to oblige the U.S. on drug prices. But one thing to keep in mind is that in pharma, many of the companies demanding higher global prices are actually based in Europe.
"We have been a proponent that wealthier nations in Europe and around the world need to pay their fair share of innovation, which they haven't been doing," said Aradhana Sarin, chief financial officer of AstraZeneca, a multinational pharma based in the U.K. "Net-net, U.S. prices will come down and ex-U.S. prices need to go up," she said in an interview.
Pfizer CEO Albert Bourla was even more direct, saying it is time for countries such as France to pay more or go without new drugs. If forced to choose between reducing U.S. prices to France's level or stopping supply to France, Pfizer would choose the latter, Bourla told reporters at a pharma-industry conference last week in San Francisco.
U.S. biotech Madrigal might offer a near-term test case. The company already sells its liver drug, Rezdiffra, in the U.S. Now it is seeking to sell it at a net price of about $39,500 for a year's supply in Germany, roughly the blended government rate it charges U.S. programs. Negotiations will unfold over the next several months. "The good news is, I think most countries want to have a conversation with us," CEO Bill Sibold said in an interview. "And they're also aware of the administration's wishes."
There is a risk this policy adds complexity without real savings. Andrew Mulcahy, a health-policy expert at Rand, says tying U.S. prices to other countries surrenders drug-pricing policy to foreign nations. Instead, the U.S. should determine how much we value drugs ourselves, he argues. Besides, the U.S. lacks transparent pricing data given the maze of hidden rebates and discounts, and these rebate systems could be exported to other countries to inflate reported launch prices abroad, he said. Mulcahy expects some movement at the margins but doubts major overseas increases are realistic.
For now, Big Pharma remains insulated from severe impact to its bottom line. Last week, Johnson & Johnson quantified the hit from the Trump administration's MFN policy so far -- mostly a result of discounts to Medicaid -- at several hundred million dollars to annual sales. That is effectively a rounding error for a company with nearly $100 billion in revenue annually.
In the long run, higher international prices could help the industry diversify away from its dependence on the U.S. But only if the rest of the world goes along.
Write to David Wainer at david.wainer@wsj.com
(END) Dow Jones Newswires
January 25, 2026 05:30 ET (10:30 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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