The current geopolitical context is causing many uncertainties in all industries. Critical aspects, such as the development of new medicines, cause deep concern. Discovering a molecule that could be a potential treatment, conducting clinical trials to demonstrate its efficacy and safety, and finally commercializing it so that patients benefit is part of a long process, of great complexity and high risk.
As recalled by the employers' association Farmaindustria, the high investment involved in the development of a new drug is financed, in large part, by the return from medicines already on the market. For decades, the U.S. pharmaceutical market, through its healthcare system, has financed a very significant part of that global innovation.
For this reason, the decisions of the United States on the price of medicines affect both its own healthcare system and that of the rest of the world. In this scenario, the key concept of Most Favored Nation (MFN) emerges: this new policy, announced by Donald Trump last May, aims to ensure that the U.S. will not pay more for certain drugs than countries with a higher income level, taken from a list of OECD nations with a Gross Domestic Product per capita greater than 60% of the U.S. GDP: Germany, France, Italy, United Kingdom, Netherlands, Sweden, Switzerland, Australia, Japan and other countries, such as Spain. Price referencing between healthcare systems is something that countries in Europe already use to set drug prices.
But it must be taken into account that prices are different in the U.S. versus Europe because healthcare systems are very different: here, healthcare systems are public, with universal coverage and drug prices intervened. In the U.S. there is a mixed and fragmented system, with private intermediaries that influence the price of medicines.
In practice, the U.S. compares international prices and sets the lowest as a reference to determine what U.S. healthcare programs will pay. The objective is to reduce the cost of medicines paid by the North American healthcare system. But this approach implies a second line of pressure, with tariff threats and incentives that aim to direct companies to invest and produce more in the United States. This double strategy is completely reconfiguring the global board of the pharmaceutical industry.
As is well known, the war in Iran is generating great uncertainty in the energy and logistics markets, with potential repercussions on the costs of production and supply of medicines. If the war is prolonged, the situation could resemble what happened with the war in Ukraine, with more than 900 million euros of impact on pharmaceutical laboratories due to both energy costs and the increase in raw material prices.
In fact, Carlos Cuerpo, Vice President of the Government and Minister of Economy, stated today in declarations on Onda Cero, that, if the conflict in the Persian Gulf continues, "costs could become significant not only in price, but also in activity. Which is much more worrying."
Furthermore, it must be remembered that Europe has been for years losing competitiveness against the United States and China in aspects such as biomedical research, manufacturing, and investment. For these reasons, from Farmaindustria it is pointed out that Europe must react to reverse the loss of competitiveness it has been suffering for the last two decades if it does not want to be left behind in biomedical research and, therefore, in the access of its patients to new treatments.
Iran, new front
The Strait of Hormuz is a key geostrategic location, as a large part of the oil and liquefied natural gas transported by ship passes through this point. Its closure is causing disruptions in energy prices and financial markets, with possible inflationary effects if the conflict prolongs, as has already happened in other recent crises.
From Farmaindustria it is stressed that this conflict does not directly affect the pharmaceutical sector, but a prolonged crisis could have a relevant indirect impact. The reason is that the rising cost of energy, raw materials, and international transport increases the production and supply costs of medicines. Unlike other sectors, the pharmaceutical industry operates in a regulated price environment, which prevents these additional costs from being passed on to the final price, which implies that they must be assumed by the companies. In previous situations, such as the war in Ukraine, the sector already absorbed a sharp increase in costs to guarantee the supply of medicines. And that commitment to patients, as Farmaindustria insists, is once again key in a context of growing international uncertainty.
New framework of tariffs
On April third a new chapter of this story was written, when the Donald Trump Administration published a Declaration by which it officially approves a new tariff framework for pharmaceutical product imports: for Europe, and therefore for Spain, the ceiling has been set at 15% (with some exceptions).
This decision, according to sources from Farmaindustria, will have a direct cost on patients, healthcare systems, and the pharmaceutical industry both in the United States and in Europe. The reason is that medicines are not just a consumer product; they are a strategic and vital asset for the well-being of society, which is why the pharmaceutical employers' association emphasizes that no measure should be implemented that hinders their arrival to patients and allows access to treatments for professionals and healthcare systems.
Tariffs are part of a broader US strategy to strengthen its industrial position. Along with the Most Favored Nation pricing policy, the threat of new tariffs seeks to incentivize pharmaceutical companies to invest and produce more within the North American country. This combination of price pressure and trade barriers can influence where new medicines are decided to be researched, manufactured, and launched, with consequences for Europe and for patients' access to biopharmaceutical innovation.
To all this, it must be added that Europe is going through a difficult stage of loss of competitiveness against the U.S. and China, fundamentally, in terms of research, manufacturing, and launching of new medicines. The Old Continent was a world leader in the launch of new drugs for patients in the 90s. Ten years later it lost the top spot to the U.S. And in 2024 China surpassed Europe for the first time, relegating the EU to the third global position.
Three effects
The drop in prices in the US pressuring Europeans could have three effects. First, reduce income destined for R&D in Europe. Second, put at risk the strategic autonomy of the continent. Lastly, disincentivize investments in manufacturing and clinical trials in the region.
The new situation would deepen the crisis of competitiveness that Europe has been suffering in the last 20 years. And, specifically, the NMF policy can have a direct impact on the launches of new medicines in the European region.
However, it must be insisted that, due to this measure, drug prices in Europe will not rise. The explanation is that subsidized medicines have prices controlled by European governments. For example, in the case of Spain, the prices of subsidized medicines erode over time, warns Farmaindustria. In no case can the laboratory unilaterally increase the price of a subsidized medicine, and it is necessary for it to be agreed upon in the Interministerial Commission on Drug Prices.
However, in the context of the MFN policy and new tariffs, it is possible that the prices of new medicines will be affected in Europe, which is why the employers' association insists that it is necessary to maintain protection measures such as the confidentiality of negotiated drug prices, since fewer differences are presumed between launch prices in the U.S. and the EU.
It must be remembered that the official price of financed medicines in our country is public. In fact, the Ministry of Health publishes it. What is not made public is the final discount that the State negotiates with each company. The reason is that if those discounts were published, Spain would lose capacity to negotiate lower prices, since other countries would automatically ask for the same conditions and companies would stop offering discounts adapted to each healthcare system.
Can the new U.S. policy increase public healthcare spending in Spain?
Pharmaceutical spending is only a part of total healthcare spending. In addition, medicines generate savings in other areas, such as hospitalizations, emergencies, sick leave, or pensions. A recent report by Analistas Financieros Internacionales calculates the savings generated in other public budget items, due to the savings that the improved health of the population achieved by new medicines, at two-thirds of the total volume of public pharmaceutical spending. And this without taking into account the savings they produce in the private sphere, such as sick leave or the reduced need for care for the sick. The price of a medicine must always be based on the value it provides for the patient and the healthcare system
However, the SNS is clearly underfunded: Spanish public healthcare spending is well below the European average, both in per capita terms and in terms of % of GDP.
The challenge, for Farmaindustria, is to adequately value innovation and accelerate its arrival to patients. Medicine must be seen as an investment, not as an expense: each euro invested in new medicines generates 4 euros in economic return for Spain.
The next question that arises is whether this new scenario can have an impact on the availability of new medicines for patients in Europe and Spain. And the answer is that there is already a significant delay in the arrival of medicines compared to the US and other markets: in Spain, patients receive new treatments, on average, more than 600 days after their European approval, to which must be added more than 150 days, also on average, until they have wide availability in the autonomous communities. Global uncertainty does not help and forces us to be attentive and to give political signals that decisively commit to biopharmaceutical innovation in Europe and Spain, advise from Farmaindustria.
Following the recent revision of European pharmaceutical legislation, which for the employers' association has lacked the necessary ambition to curb Europe's loss of competitiveness, new opportunities are now opening up, from their perspective, with the future European Biotechnology Law, the European Health Data Space, and the awaited Law on Medicines and Medical Devices in Spain. All of them, according to their point of view, must promote a true innovation ecosystem and facilitate faster and more predictable access to new treatments.
The key to this situation is that there is a lot at stake in investment in research, production, and clinical trials. The U.S. is attracting enormous investments, more than 500 billion dollars announced by the industry in recent months. For this reason, Europe needs to react to remain a relevant player in innovation, manufacturing, and clinical trials.
In the specific case of Spain, the impact can be very relevant, since we are European leaders in clinical trials. Furthermore, the production of medicines exceeds 20,000 million euros per year, with medicine being the fifth most exported product. But maintaining this leadership requires, for Farmaindustria, continuous work and decisive and stable support policies, as well as initiatives that shorten the time it takes to make innovative medicines available to patients in Spain.
Finally, Farmaindustria guarantees that, nowadays, no supply problems are foreseen derived from the US MFN policy or possible new tariffs. Although drug shortages could occur if the conflict in the Middle East is prolonged.