When the Trump administration signed its Most-Favoured Nation (MFN) executive order in 2025, few doubted the measure would shake global pharmaceutical markets. By tying U.S. drug prices to the lowest government-negotiated rates in Europe and Canada, the White House pitched the plan as relief for American patients at the pharmacy counter.
Author: Szilvia Kecsmar
But as Dr. Emil Panzaru, Research Director at the Consumer Choice Center, warns in an interview with CEA Talk, the knock-on effects could prove far more severe: “It works like a price control,” he explains. “You may see lower sticker prices, but the costs of R&D remain the same. If companies cannot recover those investments, they may simply stop launching or developing new drugs.”
The stakes are considerable. It takes on average ten years and more than $2.6 billion to bring a new drug to market. University of Chicago modelling suggests MFN-style price controls could reduce global R&D investment by up to 60%, eliminating hundreds of new medicines over the next two decades. “That means fewer cancer treatments, fewer options for patients with rare diseases—lost opportunities measured in lives,” Panzaru stresses.
Europe’s Patent Gamble
Across the Atlantic, the European Commission has floated reforms that would shorten data exclusivity for new medicines from eight years to six. While exemptions for smaller firms and unmet medical needs are under discussion, the direction is clear: Europe is rethinking how much protection to grant innovators.
For Panzaru, this risks making the EU a less attractive jurisdiction for investment. “If companies are forced to hand over data earlier, competitors can free-ride on research they never funded. That disincentivises innovation and erodes Europe’s competitiveness vis-à-vis the U.S., which has become far more dynamic in life sciences.”
The debate has also turned to compulsory licensing—allowing governments to override patents in emergencies. Brussels argues this is a lesson learned from the pandemic. Washington, however, views it as an alarming signal. “From a U.S. perspective, compulsory licensing is essentially confiscating IP. It risks violating WTO rules and intensifying transatlantic disputes,” says Panzaru.
A Collision Course
Taken together—U.S. MFN pricing on one side, EU compulsory licensing on the other—the policies appear to put Washington and Brussels on a collision course. “We could end up with prolonged disputes and retaliation,” Panzaru warns. “The U.S. has already signalled it could use tariffs or regulatory measures if it sees European overreach.”
Underlying the debate is a persistent complaint: American patients, through higher drug prices, are effectively subsidising Europe’s cheaper system. The U.S. shoulders around 27% of global R&D funding, hosting half of all clinical trials worldwide. “Europeans enjoy lower prices because the U.S. has long paid the bill,” Panzaru notes. “If that stops, the entire system could unravel.”
The Middleman Problem
Yet high U.S. prices are not solely explained by innovation costs. Pharmacy benefit managers—powerful intermediaries negotiating rebates between manufacturers, insurers, and pharmacies—often capture large discounts without passing them on to patients. “They pocket 40% or more of rebates. The problem isn’t just drugmakers; it’s these middlemen keeping the system opaque,” Panzaru argues.
Fragile Compromise
Recent trade talks have produced a tentative compromise: a 15% tariff on generic pharmaceuticals, rather than on cutting-edge drugs. It softens the blow, but uncertainty remains. “It’s a fragile situation,” Panzaru cautions. “If either side doubles down—on MFN in the U.S. or compulsory licensing in the EU—we risk undermining both innovation and patient access.”
For now, both Washington and Brussels insist they want “reciprocal, fair and balanced trade.” The real question is whether they can reconcile affordability with innovation before the next crisis tests their systems again.
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Cover photo credit: Gemini
Szilvia Kecsmar is a writer, journalist, and media informatics specialist, serving as the editor-in-chief of CEA Magazine.
