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A Trump administration program designed to slash U.S. prescription drug prices is sending shock waves through the pharmaceutical industry, where executives fear the resulting pricing fog could shred licensing agreements signed years before the policy ever appeared on the horizon.

The White House rolled out its latest “most-favored-nation” initiative early in President Donald Trump’s second term, aiming to align American drug costs with those paid by comparable developed nations. Officials say they have already locked in agreements with 26 companies covering treatments for hemophilia, Parkinson’s disease, cancer and other conditions.

Experts project lower prices could reach patients by year’s end—welcome news for many consumers. Yet for drugmakers, especially smaller and mid-sized firms, the shift feels more like a sudden storm.

Long-Signed Deals Face New Risks

Bringing a drug to market can take a decade and hundreds of millions of dollars, according to Skadden Arps partner Gregory A. Litt. To secure early capital, companies often license rights for markets outside their home country. In those arrangements, foreign licensees—frequently in Europe—retain control over pricing.

Under the MFN framework, a lower European price could now cap what the same drug can fetch in the United States.

“Before the MFN pricing scenario arose, this probably wasn’t seen as a problem on either side,” Litt told Law360. “The U.S. rights holder now has to be concerned that if the European side prices the drug for Europe at a price that’s lower than the price that they were hoping to sell the drug for in the U.S., and if the MFN pricing regime ultimately applies to their drug, they may be restricted in the price they can obtain for the drug in the United States.”

Goodwin Procter partner Heath R. Ingram called the situation “a huge concern.” Allowing partners to set prices abroad, he said, can undermine an entire U.S. commercial strategy.

Baker McKenzie partner Oren Livne labeled these split-territory deals “problematic.” An independent European partner could effectively dictate the U.S. price if MFN applies. Companies may respond by buying back rights or restructuring royalty streams, he noted.

Rare-Disease Makers Weigh Painful Choices

The pressure hits hardest on firms with a single rare-disease product. Ingram, who sits on pricing committees for such companies, said executives are asking whether treating a handful of patients in France or Spain is worth jeopardizing their U.S. pricing. “It’s a very challenging bioethical issue,” he said.

In essence, the MFN effort seeks to stop Americans from shouldering the world’s biomedical research costs, explained Skadden of counsel Rachel Turow. For decades the United States lacked tools to negotiate prices through Medicare, Medicaid or Tricare. The Inflation Reduction Act began limited Medicare bargaining; the MFN plan expands that reach. The administration has threatened 100% tariffs on manufacturers that refuse concessions, and the Centers for Medicare & Medicaid Services has proposed implementing rules.

Because the policy accelerated so quickly, most companies were not preparing for it before 2024 or 2025, Livne said. Long-range diligence obligations requiring launches in both the U.S. and Europe, along with tied milestone payments, suddenly look risky. New contracts are already being rewritten with MFN escape clauses.

The larger question remains unanswered: if U.S. prices fall without Europe absorbing more of the cost, margins shrink and the money available for future drug development shrinks with them.