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Amid growing concerns over high drug prices in the United States, the federal government has proposed reforms to address the cost of prescription medications. With American consumers paying significantly more compared to other developed nations, policymakers are considering measures aimed at reducing costs, improving transparency, and examining the role of middlemen in the drug pricing system.
One major initiative is targeting pharmacy benefit managers (PBMs), who act as intermediaries between drug manufacturers and consumers. A key proposal under consideration is eliminating the “safe harbor” provision for PBMs, which would require that any rebates or discounts go directly to patients, rather than allowing PBMs to retain them.
Another proposal would increase transparency around PBM pricing and rebate structures, making it easier for the public to understand the costs and markups associated with prescription drugs. Medicare is also a tool that has helped American elderly patients immensely by negotiating drug prices with manufacturers, ultimately bringing savings for pharmaceutical drugs.
Drug manufacturers are also keeping a close watch on developments within the pharmaceutical industry. Some companies are keeping an eye out for the influence of political figures like Robert F. Kennedy Jr., who pushes against vaccinations.. In 2024, only 15 companies in the pharmaceutical industry generated $45.1 billion of revenue from vaccines, which is 6.7% of total revenue; as of 2024, experts saw a rapid decline in overall vaccination rates and predict that this will continue to decrease.
Beyond drug pricing, the pharmaceutical industry is also focused on research and development (R&D). Industry leaders are hopeful that the Trump administration will offer corporate tax relief, which would provide companies with more capital to invest in developing new treatments. American drug manufacturers are also closely monitoring potential changes in tariffs, particularly on imported drugs and active pharmaceutical ingredients (APIs), which could affect their cost structures.
Foreign direct investment, or FDI, in the U.S. pharmaceutical industry has undergone significant changes across multiple countries. From 2023 to 2024, FDI from Europe to the U.S. increased to $5.4 billion, a rise of 787%. U.S. pharmaceutical companies rely on imports from key partners such as Canada, Mexico, and China, which may prompt them to reevaluate their supply chain strategies. Discussions about potential trade agreements between the U.S. and the U.K. have emerged, but such negotiations could also influence trade relations with other countries.
Furthermore, increased attention on the pharmaceutical industry could impact drug pricing and accessibility. Recipharm CEO Greg Behar said that while "the price point for drugs in the U.S. and Europe might not go up, access will increase." Behar noted this could be beneficial because companies like Recipharm can drive up volumes and bolster efficiency overall.
In fact, China provides the U.S. pharmaceutical industry with products ranging from raw materials to active pharmaceutical ingredients. For example, Thermo Fisher, an American pharmaceutical company, generates 8% of its revenue from operations in China, where it holds a significant market presence. Other companies like Recipharm, which has locations in different countries, such as Europe, India, and Israel, and the U.S., are better positioned to be relatively unaffected by rapidly changing U.S. economic policy.
In the next few years, reforms, tariffs, and changing supply chains will alter the global pharmaceutical market, especially in the U.S.. Companies within the pharmaceutical industry will have to decide how to navigate these upcoming changes in a way that works best for their company.
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