Medicaid to Receive Most Favored Nation Pricing on Pfizer Drugs

The White House has announced that President Trump has made a deal with Pfizer for state Medicaid to receive most favored nation pricing on Pfizer pharmaceuticals.  This is welcome news; however, I do wonder if the rest of the world’s pharmaceutical prices will rise.  The White House has released a fact sheet that states:

ADVANCING MOST-FAVORED-NATION PRICING: Today, President Donald J. Trump announced the first agreement with a major pharmaceutical company, Pfizer, to bring American drug prices in line with the lowest paid by other developed nations (known as the most-favored-nation, or MFN, price).

• The agreement will provide every State Medicaid program in the country access to MFN drug prices on Pfizer products, resulting in many millions of dollars in savings and continuing President Trump’s historic efforts to strengthen the program for the most vulnerable.
• The agreement ensures foreign nations can no longer use price controls to freeride on American innovation by guaranteeing MFN prices on all new innovative medicines Pfizer brings to market. 
• The agreement requires Pfizer to repatriate increased foreign revenue on existing products that Pfizer realizes as a result of the President’s strong America First U.S. trade policies for the benefit of American patients. 
• The agreement requires Pfizer to offer medicines at a deep discount off the list price when selling directly to American patients.

 
DELIVERING REDUCED COSTS: Today’s actions will result in tangible cost savings to American patients and the healthcare system as a whole. Taken together, more than 100 million patients are impacted by the diseases Pfizer’s medicines treat, and many of those will benefit from the President’s successful negotiation of lower prices for Americans. Examples include:

• Eucrisa, a topical ointment for atopic dermatitis, will be made available at an 80% discount to patients purchasing directly.
• Xeljanz, a widely used oral medication for rheumatoid arthritis, psoriatic arthritis, and ulcerative colitis, will be available at a 40% discount to patients purchasing directly.
•  Zavzpret, a commonly utilized treatment for migraines, will be sold directly to patients at a 50% discount.

 
ENDING GLOBAL FREELOADING ON AMERICAN PHARMACEUTICAL INNOVATION:  President Trump is taking decisive action to rebalance a system that allows pharmaceutical manufacturers to offer low prices to other wealthy nations while charging Americans significantly higher prices.  

• According to recent data, the prices Americans pay for brand-name drugs are more than three times the price other Organization for Economic Cooperation and Development nations pay, even after accounting for discounts manufacturers provide in the U.S. 
• The United States has less than five percent of the world’s population, yet roughly 75% of global pharmaceutical profits come from American taxpayers.
• Drug manufacturers benefit from generous research subsidies and enormous healthcare spending by the U.S. Government. Instead of passing that benefit through to American consumers, drug manufacturers then discount their products abroad to gain access to foreign markets and subsidize those discounts through high prices charged in America. Americans are subsidizing drug-manufacturer profits and foreign health systems, both in development and once the drugs are sold. 

 
DELIVERING ON PROMISES TO PUT AMERICAN PATIENTS FIRST: President Trump is delivering on promises for American patients that the political establishment did not believe were possible.

• On May 12, 2025, President Trump signed an Executive Order titled: “Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients” directing the Administration to take numerous actions to bring American drug prices in line with those paid by similar nations.
• On July 31, 2025, President Trump sent letters to leading pharmaceutical manufacturers outlining the steps they must take to bring down the prices of prescription drugs in the United States to match the lowest price offered in other developed nations 
• President Trump has been relentless in his effort to address the unfair and outrageous prices Americans pay for prescription drugs:

o   President Trump: “In case after case, our citizens pay massively higher prices than other nations pay for the same exact pill, from the same factory, effectively subsidizing socialism aboard [abroad] with skyrocketing prices at home. So we would spend tremendous amounts of money in order to provide inexpensive drugs to another country. And when I say the price is different, you can see some examples where the price is beyond anything — four times, five times different.”

Another Case of Pharma Weakening the Patent System (and University Technology Transfer)

The LA Times recently published an article, "UCLA’s Efforts to Patent a Costly Patent Cancer Drug in India Hurts the Poor, Critics Say,” concerning Pfizer’s drug, Xtandi.  Xtandi, which is used to treat prostate cancer, was developed (with U.S. government funding) and licensed out by University of California, Los Angeles.  Recently, in a royalty securitization deal, UCLA received more than $500 million in exchange for future royalty rights from Royalty Pharma.  Notably, UCLA is now seeking patent rights for Xtandi in India, which it states it has a contractual obligation to do.  The article states:

“What’s special about this case is the fact that the University of California is going against their own licensing policy by aggressively seeking a patent in India on this drug,” KEI Director James Love said.

That policy, as UCLA summarized in a statement to The Times, is “intended to facilitate all populations having access to medications and other products and services made possible by UCLA innovation.”

But UCLA also noted the “concerns about prescription drug pricing” among the activists and others and said it was willing to explore the problem further.

The school said “we are convening a working group to evaluate our approach to technology licensing in ways that benefit California, the nation and the developing world” while also continuing to give drug companies enough incentive to commercialize its discoveries, just as Medivation did with Xtandi.

In the meantime, the activists contend that a daily dose of Xtandi is selling in India for roughly 40 times a person’s daily income in that nation, which they called “excessive and shamefully unaffordable.”

Notably, the University of California is a signatory to the In the Public Interest: Nine Points to Consider in Licensing University Technology White Paper.  Point 9 of the White Paper states:

Consider including provisions that address unmet needs, such as those of neglected patient populations or geographic areas, giving particular attention to improved therapeutics, diagnostics and agricultural technologies for the developing world

Universities have a social compact with society.  As educational and research institutions, it is our responsibility to generate and transmit knowledge, both to our students and the wider society.  We have a specific and central role in helping to advance knowledge in many fields and to manage the deployment of resulting innovations for the public benefit. In no field is the importance of doing so clearer than it is in medicine.  

Around the world millions of people are suffering and dying from preventable or curable diseases.  The failure to prevent or treat disease has many causes. We have a responsibility to try to alleviate it, including finding a way to share the fruits of what we learn globally, at sustainable and affordable prices, for the benefit of the world’s poor. There is an increased awareness that responsible licensing includes consideration of the needs of people in developing countries and members of other underserved populations.

The details involved in any agreement provisions attempting to address this issue are complex and will require expert planning and careful negotiation.   The application will vary in different contexts.  The principle, however, is simple.  Universities should strive to construct licensing arrangements in ways that ensure that these underprivileged populations have low- or no-cost access to adequate quantities of these medical innovations. 

We recognize that licensing initiatives cannot solve the problem by themselves.  Licensing techniques alone, without significant added funding, can, at most, enhance access to medicines for which there is demand in wealthier countries.   Diseases that afflict only the global poor have long suffered from lack of investment in research and development: the prospects of profit do not exist to draw commercial development, and public funding for diseases suffered by those who live far away from nations that can afford it is difficult to obtain and sustain. Through thoughtful management and licensing of intellectual property, however, drugs, therapies, and agricultural technologies developed at universities can at least help to alleviate suffering from disease or hunger in historically marginalized population groups.

This appears to be another case of a company making a decision based on pricing that will likely undermine confidence in the patent system, particularly undermining technology transfer from universities.  Universities should exercise care in licensing to ensure that they have the final word on enforcement as well as patenting in other countries (see follow-up patenting noted by Professor Lisa Larrimore Ouellette).  Let’s not kill the "golden goose."  Perhaps UCLA can use part of the $500 million for a fund for people who need access to the drug in India. 

Farewell Sandwich

In the midst of discussions about the future of IP tax and incentives in the UK comes the news that Pfizer is closing its UK R&D facility at Sandwich in Kent, after about 50 years of R&D at the site. The pharma group will no longer have any UK R&D operations.

It's part of a restructuring that will move more of Pfizer's R&D to the US, and reduce the amount of R&D that the group does, moving away from 'high-risk R&D' and eliminating altogether a number of areas of R&D. That said, a move to the US does suggest that they aren't being enticed by tax incentives, as the US incentives for R&D are not the most attractive. The project seems to reflect its description as a cost-control exercise overall, unsurprising given the group's cuts in sales forecasts, reflecting issues such as Lipitor coming out of patent protection in November.

Ruminations on the Pfizer-Wyeth Merger

Amidst all the economic doom and gloom coming out of Washington, London and Davos (I think they had to do without Sharon Stone and Angelina Jolie this year), this week's announcement of the Pfizer-Wyeth merger was notable. If consummated, the $68 billion merger will be the largest business wedding of its kind in the pharmaceutical industry. The fact that deal is being made in the current economic climate is all the more remarkable. Based principally on a New York Times podcast of the proposed transaction, the principal reasons for the merger seem to be driven by three main factors.

First, patent protection for Pfizer's main product, LIPITOR, the cholesterol drug, is set to expire in 2011. LIPITOR is reported to constitute 25% of Pfizer's revenues. While the lapse of patent protection does not necessarily mean that sales of LIPITOR will totally then cease, it appears that Pfizer will face significant competition from generic competitors. We like our MBA students to consider that a powerful brand may enable a patented drug to successfully withstand the loss of patent protection. If the LIPITOR mark cannot accomplish this in a big way, then maybe it is time to stop relaying the story how the NutraSweet saved the post-patent day for Aspartame, since it will be no longer relevant.

Second, Pfizer seems to have relatively poor product prospects in its pipeline, so it has to look elsewhere. Much has been written during the last several years over the increasing inability of Big Pharma to come up with a new generation of products. Wyeth appears to provide a partial solution for at least two reasons.

The end of the patent pipeline?

First, Wyeth is reported to be particularly strong in the vaccine area and in biotech (where one report had the company listed as no. 3 in the industry). Second, Wyeth continues to enjoy revenues from the well-known OTC pain reliever--ADVIL. Assuming that there is no patent protection that is about the expire, it would seem that ADVIL promises a continued flow of revenues irrespective of any special IP coverage. Left unclear is whether Wyeth's patent prospects are materially better than those of Wyeth and doubts have been expressed.

Third, there is a view that economic forces are driving Big Pharma towards merger and consolidation. The rationale for this is not fully convincing. I imagine that size and resources may have advantage, at least to some extent in R&D and product development, not to mention marketing and advertising.

Bigger may not be better ...

That view is, however, not universally accepted. On August 24, 2007, an article appeared in Fortune by John Simons entitled "Why a Pfizer-Wyeth Merger is a Bad Idea." Simons concluded as follows:

"The Pfizer/Wyeth merger scenario is far-fetched, particularly because Pfizer would inherit another troubled pipeline and more big-sellers whose patents expire in the same concentrated period of 2010 and 2011. "Would the idea behind the merger be that misery loves company?" queries Standard & Poors pharma analyst, Herman Saftlas. "Most mergers in this sector haven't panned out from an earnings growth perspective. But even worse, these two companies are in the same boat."

Perhaps Simons was wrong in his analysis in 2007. If so, one wonders why the deal did not take place then. Alternatively, if Simons was correct 16 months ago, then what has changed since then, other than financial meltdown, cash flow misery, and the cratering of the real economy, that now makes the merger more compelling? The answer is not clear.