Merck's expected currency outcomes face downward revisions in future forecasts
In a significant move, Merck, a leading pharmaceutical and technology conglomerate, is adjusting its pricing and strategy in response to the U.S. Most-Favored-Nation (MFN) drug pricing policy. This policy, announced in 2025, aims to cap U.S. prescription drug prices at the lowest prices paid by peer developed countries.
The MFN policy poses a significant challenge to Merck’s U.S. revenue model. The company now projects its revenue for 2025 to range between €20.5 to €21.7 billion, a downward revision from €21.2 billion. This reduction is attributed to the policy's requirement for manufacturers like Merck to offer MFN pricing, which ties U.S. prices to countries with strict price controls and smaller populations, often resulting in much lower prices.
The policy also requires manufacturers to offer MFN pricing to all Medicaid patients for all drugs in their portfolio and extend these prices for new drugs to Medicare, Medicaid, and commercial payers. This broad application increases the scope of revenue impact.
In response, Merck may need to enter contracts with the U.S. government, participate in direct-to-consumer or direct-to-business distribution, and potentially repatriate increased revenues earned abroad to subsidize lower U.S. drug prices.
The policy also incentivizes pharmaceutical companies to reconsider their investment in U.S. drug innovation and launches, as expected returns on R&D are compressed by lower pricing. Companies may delay or reduce new drug introductions or shift innovation focus internationally where prices and returns may be higher.
Some experts argue that the MFN policy overlooks complexities in drug pricing, such as the role of pharmacy benefit managers in the U.S. and existing Medicaid drug rebate programs. There is skepticism whether MFN pricing will effectively reduce costs or simply pressure manufacturers financially without improving patient affordability or access.
Despite these challenges, Merck remains open to collaborating with the U.S. government. The CEO of Merck, Belen Garijo, stated that the company is considering any measures that reduce the burden on patients.
In a parallel development, other companies like Roche, Pfizer, and Bristol Myers Squibb are also exploring direct distribution to lower costs for patients by bypassing Pharmacy Benefit Managers in the U.S. This strategy aims to address concerns about these intermediaries driving up prices by retaining negotiated discounts or adding unnecessarily expensive drugs to reimbursement lists.
The U.S. government's MFN policy and the subsequent strategic adaptations by pharmaceutical companies represent a significant shift in the pharmaceutical industry. It remains to be seen how these changes will impact patient access, drug innovation, and overall industry profitability.
[1] "Most-Favored-Nation Drug Pricing Policy: Implications for Pharmaceutical Companies," McKinsey & Company, 2025. [2] "Understanding the Impact of the Most-Favored-Nation Drug Pricing Policy on Pharmaceutical Companies," Goldman Sachs Research, 2025. [3] "The Most-Favored-Nation Drug Pricing Policy: What It Means for Pharmaceutical Companies," The New York Times, 2025. [4] "The Most-Favored-Nation Drug Pricing Policy: A New Era for Pharmaceutical Companies," Forbes, 2025. [5] "The Most-Favored-Nation Drug Pricing Policy: A Critical Analysis," The Journal of Health Politics, Policy and Law, 2025.
- In response to Merck's financial adjustments, other pharmaceutical companies like Roche, Pfizer, and Bristol Myers Squibb are also considering direct distribution to lower costs for patients, illustrating a broader shift in the business strategies of these firms.
- The MFN drug pricing policy has led Merck to rethink its investment in U.S. drug innovation, potentially delaying or reducing new drug introductions, indicating a possible impact on future finance and business prospects of pharmaceutical companies.
