US government policies of Most Favored Nation (MFN) and tariffs threaten to disrupt Europe’s pharmaceutical trade, but while European countries explore alternative markets in Asia, it may be difficult for them to substitute the innovation and profit potential offered by the US, say experts.
Initially excluded from the “Liberation Day” tariffs, US pharma imports were briefly threatened with 250% duties before the EU secured a deal at 15%. However, last month, after the US Supreme Court overturned the initial global tariffs, US President Donald Trump responded with blanket 10% tariffs under temporary measures, before raising these to 15%.
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Since 2025, European leaders have made several overtures to Asian countries, including a historic free trade agreement between the EU and India, which has a large generics industry, and diplomatic trips to China, which has an emerging innovator drug discovery engine.
However, experts say that Asian markets are unlikely to supplant the increasingly unpredictable US market, and that European countries will need to adapt to the new landscape given the innovative strength and commercial depth of the US.
US markets remain key
After the US government introduced the MFN policy through an executive order in 2025, several pharma companies, like Pfizer, struck deals that allowed their new medicines to be subject to MFN prices in Medicaid.
Speaking at the 2026 J.P. Morgan Healthcare Conference, Pfizer CEO Albert Bourla suggested the MFN policy could mean companies would raise overseas prices in line with those in the US, telling Reuters, “Shall we reduce the US price to France’s level or stop supplying France? We [will] stop supplying France.”
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By GlobalDataThe US has a leading 40% share of drugs in development globally, according to a GlobalData report. However, in second place is an increasingly competitive China with an approximately 20% share, leaving the five major European markets (5EU: France, Germany, Italy, Spain, and the UK) with 11%. GlobalData is the parent company of Pharmaceutical Technology.
In December 2025, French President Emmanuel Macron met Chinese Premier Xi Jinping and both countries issued a statement committing to foster “a free, open, transparent, inclusive and non-discriminatory environment for trade and investment”.
UK Prime Minister Keir Starmer visited the country in January 2026, during which AstraZeneca announced a $15bn investment in Chinese manufacturing. German Chancellor Friederich Merz arrived on 25 February, after figures released by the country’s Federal Statistical Office on 20 February showed China had overtaken the US as Germany’s primary trade partner.
Chinese pharmaceutical innovation could offer cheaper alternatives to new medicines from the US, says Diederik Stadig, healthcare economist at ING Research. However, Stadig estimates it may take 5–10 years before China can seriously challenge the US for Europe’s innovative therapy market.
Alexander Natz, general secretary for the European Confederation of Pharmaceutical Entrepreneurs (EUCOPE), agrees. “China is relevant for research, for production, potentially as a market for our companies in the next decades but not for the next five years,” he says.
Pharma remains critical for European economy
European pharmaceuticals are among the continent’s key exports, of which the US is the largest buyer, as per Eurostat, which is part of the European Commission.
The risks of higher tariffs and MFN pricing have made the need for Europe’s pharma trade to place additional emphasis on other regions plainly apparent, even if the significance of the US market remains without doubt, says Torsten Syrbe, partner and co-chair of healthcare and life sciences at Clifford Chance. Syrbe says there is reason for pharma to be optimistic towards the free trade agreement signed between the EU and India this January. As per the EU, India would “mostly eliminate[d]” tariffs of up to 11% on pharmaceuticals under this agreement.
But others say it’s unlikely this represents a meaningful shift in European focus eastward. There are limited opportunities for Europe’s drug producers in Asia because they would need to sell their products at considerably lower prices than they could expect in the US, says David Deere, president of healthcare consultancy Biovane. Pharmaceutical sales in the US remain more profitable than anywhere else. This is driven largely by the high prices drug suppliers can command in the US, say Deere and Stadig.
A further issue with greater trade in Asian regions is the potential conflict with the EU’s strategic priorities, experts say. The EU Critical Medicines Act proposed in March 2025 aims to safeguard the supply of critical drugs in Europe, in large part by lessening dependence on a few external generics suppliers—broadly Indian and Chinese—in favour of diversified procurement and greater domestic manufacturing. Closer trade with Asian manufacturers could work against these efforts, according to Matthias Heck, senior strategic alliance advisor at EUCOPE.
But full details of the EU-India deal are not yet known, notes Jeremy Stewart, senior associate at Clifford Chance. The agreement does not include a chapter on government procurement, meaning it is unlikely to restrict future EU procurement practices used to pursue supply chain resilience, he adds.
The need for European entities to adapt
Pharmaceuticals have traditionally been safer from sanctions and restrictions in trade disputes compared with other goods, notes Syrbe, but he says this convention has changed in the last two years. Given the bipartisan support for drug price reform in the US, this increasing vulnerability is likely to stay, says Natz.
However, uncertainty around US tariffs lingers given the recent US Supreme Court decision. It remains to be seen if the 15% cap on EU imports to the US sticks, says Syrbe. Despite this, he says European pharma strategy will likely change little given the importance of the US market.
Amidst these developments, in December 2025 the US signed a three-year zero tariff deal with the UK. The deal also requires the UK to raise its quality per life year (QALY) cost effectiveness threshold by 25%, double spending over the next 10 years, and cap the portion of drug spending claimed back from suppliers at 15% via the Voluntary Scheme for Branded Medicines Pricing, Access and Growth (VPAG) scheme.
Experts see MFN and tariffs as signals of an altered pharmaceutical trade relationship between the US and Europe. If Europe is unable to source alternative innovative therapies or expand access to consumer markets in Asia, countries may be forced to adapt to this new reality. To this end, experts say European governments and industry need to propel internal reform to become internationally competitive and self-reliant.
Several issues hold European biopharma back from these goals, according to Stadig. He points to fractured regulation among the member states and shallow capital markets, which restrict investment in European developers, as key problems.
Nonetheless, recent months have brought some policy developments. In December 2025, the EU Biotech Act was proposed to fund, incentivise, and accelerate biotech innovation. More fundamentally, the EU is expected to enact its overarching Pharma Package in 2026.
The Pharma Package poses several updates to EU pharma law. These include reducing market protection for new drugs from 10 to nine years, while offering up to 11 years of protection for the most innovative and needed drugs. Additionally, European Medicines Agency (EMA) approval would make new drugs available in all member states, and stockpiling requirements would safeguard against drug shortages.
According to Stadig, the overhaul of the US life sciences sector also opens potential opportunities that Europe is well positioned to exploit, pointing to funding cuts to mRNA vaccine research in the US, an area in which European innovators are experienced enough to fill the vacuum.
If European countries can leverage their research institutions, talent pool, and world-leading companies, Stadig says they might navigate this international turbulence without being at the mercy of external markets in either the East or the West.
