Introduction
For most of the last decade, US drug pricing policy meant one thing for bankers: the Inflation Reduction Act and its Medicare negotiations. Between September 2025 and September 2026 a second system was built beside it, mostly by bilateral deals between the White House and individual drugmakers rather than by statute. Its three pieces are most-favored-nation (MFN) pricing agreements, a Section 232 tariff on imported patented medicines, and a set of Medicare and Medicaid payment models that import foreign prices into federal programs.
The pieces only make sense together: the tariff is the stick, the MFN agreement is the price of avoiding it, and the payment models reach companies that have not signed. This article walks through each mechanism, then shows how it changes launch strategy, net price assumptions and the value of US manufacturing in a pharma model.
How the MFN Agreements Work
The process started with a May 12, 2025 executive order directing the administration to bring US prices in line with those paid in other wealthy countries. Pfizer signed the first agreement on September 30, 2025, and the template has barely changed since: Medicaid access at MFN prices, MFN-aligned pricing for new launches, discounted cash sales to patients, and a US investment pledge ($70 billion in Pfizer's case), in return for a three-year grace period from pharmaceutical tariffs. By August 31, 2026 the White House counted 26 manufacturers under agreement, including mid-sized names such as Teva, UCB and BridgeBio, and claimed they cover 89% of the branded market. No methodology for that share has been published, and the agreements themselves remain confidential.
- Most-Favored-Nation (MFN) Drug Pricing
A pricing policy that ties what a US payer pays for a drug to the lowest price paid in a basket of comparable wealthy countries, usually adjusted for differences in national income. In the 2025-2026 US program, MFN pricing applies through voluntary agreements with manufacturers (covering Medicaid and new launches) and through CMS payment models that pay rebates when a US price exceeds an international benchmark.
Each agreement bundles four commitments, and they bite with very different force:
- Medicaid at MFN prices. Mostly symbolic for older brands: statutory rebates (at least 23.1% of average manufacturer price, plus best-price and inflation rebates) already put many near international levels.
- MFN launch pricing. The commitment that matters most, because it constrains the US price of every future drug and therefore the peak sales in every pipeline model.
- Direct-to-patient cash prices through TrumpRx.
- US manufacturing investment, which feeds the tariff exemption described below.
- TrumpRx
A federal website launched on February 5, 2026 that lists discounted cash prices for brand-name drugs from manufacturers with MFN agreements and routes patients to each company's own direct-to-consumer pharmacy or coupon. It does not sell drugs or process insurance claims, so its prices matter mainly for uninsured patients and poorly covered drugs such as obesity medicines.
The Section 232 Tariff: The Enforcement Mechanism
The agreements would carry little weight without the tariff. The April 2, 2026 Section 232 proclamation set a 100% duty on imported patented pharmaceuticals and their ingredients, with a schedule of lower rates that rewards exactly the behavior the MFN deals ask for. Scope is defined by patent status: a product is covered only if it carries an unexpired US patent and is listed in the FDA's Orange Book or Purple Book, which is why generics and biosimilars sit outside it for now.
| Importer status | Tariff rate | How long |
|---|---|---|
| No agreement, no onshoring plan | 100% | Open-ended |
| Imports from the EU, Japan, Korea, Switzerland | 15% | Unless a lower rate applies |
| Approved US onshoring plan | 20% | Until April 2, 2030 |
| Onshoring plan plus MFN agreement | 0% | Until January 20, 2029 |
| Generics and biosimilars | Excluded | Under review |
Duties took effect on July 31, 2026 for 17 large named companies, most already under agreement, and on September 29, 2026 for every other branded manufacturer, the date that pulled mid-sized companies in over the summer.
The capital response has been large. DPR Construction's Q4 2025 tracker counted more than $370 billion of announced US pharma manufacturing commitments over five years, led by Merck and Johnson & Johnson. Not all of it is new money, and most will take years to build, which raises the value of existing US-made capacity: a site already producing for the US market shortens the path to a lower tariff, which matters for CDMO valuations and for the reshoring trends covered in the BIOSECURE article.
GLOBE, GUARD and GENEROUS: MFN Inside Federal Programs
The third layer brings international reference prices into Medicare and Medicaid through the CMS Innovation Center, which can test payment models without new legislation. GENEROUS, a voluntary Medicaid model launched in January 2026, uses supplemental rebates to bring state Medicaid net prices down to the second-lowest net price in an eight-country basket.
GLOBE is the first mandatory one. Finalized on September 30, 2026, it requires manufacturers of certain single-source Part B drugs (those with more than $100 million of annual Part B spending in classes such as oncology, immunology and ophthalmology) to pay rebates when the US price exceeds a GDP-adjusted benchmark built from the lowest price across 19 reference countries. The model starts on January 1, 2027 and applies in randomly selected areas covering about a quarter of Part B beneficiaries. The final rule is far narrower than the December 2025 proposal: it exempts orphan-only drugs, cell and gene therapies, plasma products, drugs with a negotiated IRA price and manufacturers participating in GENEROUS, so CMS now expects four manufacturers to pay rather than 19, and projects $440 million of savings instead of $11.9 billion. PhRMA sued to block it on October 7, 2026. GUARD, the Part D counterpart, remains under review at the Office of Management and Budget.
The exemptions are the real message. Joining GENEROUS waives a manufacturer out of GLOBE, so the mandatory model works mainly as an incentive to cooperate rather than as a large revenue line. The IRA exclusion also stops two federal discounts stacking on one drug, which matters when building the Medicare portion of a revenue forecast.
What the Reset Changes in a Pharma Model
For an analyst, the reset is less about any single discount than about how many separate prices one drug now carries. Commercial insurance still runs on list price and rebates, but Medicaid, Medicare and the cash channel each follow their own rules, so the gross-to-net bridge has to be built channel by channel. A workable sequence:
Split US revenue by channel
Commercial, Medicare Part D, Medicare Part B, Medicaid and cash pay each now have their own price rule.
Apply statutory negotiation first
Use the IRA negotiated price for selected drugs from its effective year; those drugs then fall outside GLOBE.
Layer the MFN models
Apply GLOBE or GUARD rebates only where the company is not exempt, and MFN or GENEROUS pricing to Medicaid volume.
Model the cash channel
Estimate patients moving to direct-to-patient prices and the volume gained from patients previously priced out.
Add the tariff case
Cost imported volume at the applicable rate, with a scenario for relief expiring in 2029 or 2030.
Check ex-US launch timing
Test whether MFN launch commitments delay launches in low-price countries, and what that does to global peak sales.
The last step is already visible in the data. GlobalData counted a 35% fall in European drug launches in the ten months after the May 2025 executive order, steeper in the countries used as reference baskets, and Amgen withdrew Repatha from Denmark after a low tender price. When low foreign prices can cap the US price, a drugmaker has a reason to launch later abroad or not at all, which pushes ex-US revenue further out and puts MFN clauses into cross-border licensing terms. Deal teams now treat this as part of political and legislative risk rather than a footnote.
Worked Example: Semaglutide's Price Stack
Novo Nordisk's semaglutide (Ozempic and Wegovy) shows how many prices one molecule now carries. Under its November 2025 agreement, Novo set a federal price of $245 a month for Medicare and Medicaid and cut TrumpRx cash prices to about $350, from list prices near $1,000 for Ozempic and $1,350 for Wegovy. Medicare began covering obesity treatment through a GLP-1 bridge program in July 2026 with a $50 monthly copay. The IRA negotiated price for semaglutide, about $274 for a 30-day supply of the main products, takes effect on January 1, 2027. On the same date, Novo cuts the list price of Wegovy, Ozempic and Rybelsus to $675 a month, roughly 50% and 35% below the old Wegovy and Ozempic prices.
The reset is still being built: GUARD is pending, GLOBE faces litigation, the agreements are confidential and the tariff relief expires within three years. The direction is settled, though. International reference prices now shape US prices for new launches, and buyers pay more for assets whose value does not depend on a high, unchallenged US list price.
