US Biotechs Wary of European Licensing Deals Amid Drug Pricing Pressures

US biotechnology companies are increasingly hesitant to license their drugs to European partners, fearing potential backlash from the Trump administration's drug pricing initiatives. This development comes as pharmaceutical firms face mounting pressure on both sides of the Atlantic to address drug pricing disparities and access issues.

Trump's Most Favored Nation Policy Sparks Concern

The Trump administration's Most Favored Nation (MFN) drug pricing system, set to take effect on September 29, 2025, aims to align US prescription drug costs with the lowest prices offered in other developed nations. While analysts suggest the executive order may face legal challenges, its mere existence has sent ripples through the pharmaceutical industry.

Emmanuelle Trombe, co-head of McDermott Will & Schulte's life sciences industry practice, notes that US biotechs are now seeking greater control over European rights to their drugs during licensing negotiations. "It's coming [up] in every discussion now: How do you protect the European franchise? If you can drive market access in Europe with a lower price, how do I make sure that my US franchise is not impacted?" Trombe explained.

The situation has led to concerns about potential reduced access to US-developed drugs in Europe, as some companies consider avoiding European markets altogether to sidestep accusations of underpricing abroad.

UK Pricing Disputes Fuel R&D Pullback

The drug pricing debate has intensified in the United Kingdom, with several major pharmaceutical companies announcing plans to scale back or pause R&D funding in response to recent government pricing negotiations. At the core of the dispute is the UK government's decision to increase the proportion of sales that pharmaceutical companies must pay back to the National Health Service for newer branded medicines, from 15.5% to 31.3%.

Sharon Lamb, head of McDermott's UK healthcare practice group, described the industry's reaction as "a long time coming," noting that the new pricing structure has "obviously not landed well" with drugmakers.

Investment Trends Shift Amid Pricing Pressures

Despite the challenges posed by pricing disputes, investors at the Healthcare Private Equity Europe 2025 conference in London expressed cautious optimism about the sector's resilience and the improving fundraising environment after three challenging years.

Paul Tomasic, head of European healthcare at Houlihan Lokey, observed a shift in investor focus away from early-stage drug development towards "growth-driven businesses." He highlighted increased activity in medtech and healthcare services, as well as growing interest in technology-driven solutions for drug discovery, such as artificial intelligence systems like AlphaFold.

As the pharmaceutical industry navigates these complex pricing and access issues, companies and investors alike are adapting their strategies to capitalize on emerging opportunities while mitigating potential risks associated with evolving drug pricing policies on both sides of the Atlantic.