How US trade and EU austerity could force EU pharma to rewrite its playbook

Learn why EU pharma must rethink commercial, supply chain, and policy strategies as US tariffs, MFN pricing, and EU austerity collide.

In brief

• EU pharma faces dual pressure from US MFN pricing and tariffs on the one hand, and local austerity measures on the other.
• To respond, companies must rethink commercial, supply chain, tax, and policy approaches while anticipating global shifts that may benefit US competitors.
• A Go-to-Market Intelligence Hub can provide real-time insights, support agile decision-making, and guide scenario planning in an increasingly volatile global context.

The global pharmaceutical landscape is being reshaped by trade and pricing pressures. US Most Favored Nation (MFN) proposals and escalating tariffs, alongside Europe’s austerity-driven pricing controls, are creating a complex environment that challenges even the most established strategies. Supply chains, commercial models, and R&D priorities are all under scrutiny.

US trade shocks test market resilience

US proposals on tariffs and MFN pricing created investor uncertainty, driven by a lack of clarity around scope, timing, and exemptions. Markets reacted unevenly: some announcements triggered volatility, while others were met with muted responses, reflecting both resilience and doubt over enforcement.

While public reactions from European pharma have been measured, the broader industry is already feeling the aftershocks. Investor volatility, patient access concerns, and uncertainty around tariff enforcement are casting a long shadow over EU pharma’s commercial and supply chain planning. The potential consequences include shortages of essential drugs and raw materials, rising input costs, and pressure on R&D budgets and development pipelines. Trump’s announcements risk dismantling European pharma’s carefully engineered operating model of interlinked commercial, supply chain, and tax structures.

European austerity measures threaten long-term innovation

While public attention remains on US trade volatility, the real threat to EU pharma comes from within. Europe’s increasingly heavy-handed pricing interventions, ranging from hidden rebates to aggressive clawbacks, are eroding the region’s attractiveness for pharmaceutical innovation and investment.

Access to innovative medicines also remains highly uneven across Europe. Patients in some countries gain access within months, while in others the wait stretches to more than two years. Slow national assessments, reimbursement hurdles, and lengthy negotiations discourage companies from launching new treatments in less attractive markets.

As a result, Europe is losing its position as a competitive global pharma hub. Branded drug prices remain far below US levels, delaying break-even and reducing ROI. Europe’s pharmaceutical R&D spending has grown only sixfold since 1990, compared with elevenfold in the US. Europe’s share of global clinical trials has collapsed from 36% to 21%. Most strikingly, in 2024 nearly three-quarters of US-approved novel medicines were not launched in Europe. Europe’s current trajectory risks triggering a commercial and strategic marginalization of its domestic pharmaceutical industry, with revenue, R&D capital, and talent steadily shifting to more favorable regions.

Will Europe’s challenges fuel the US pharma industry?

In the wake of US tariff and MFN announcements, European pharmaceutical firms first voiced caution and opposition, warning about risks to patient access, supply chain stability, and innovation. But what began as vocal resistance is now evolving into strategic repositioning. While multiple European pharmaceutical firms signal a pivot toward the US, questions remain about whether the US ecosystem is fully prepared to absorb large-scale reindustrialization in biopharma.

The US offers regulatory reliability and geographic diversification benefits, but also faces near-term constraints in workforce availability and cost competitiveness. Opening a new US manufacturing site is a multi-year commitment; it cannot resolve immediate supply chain or tariff challenges. By the time new facilities are operational, US policy priorities may already have shifted. Even with full-scale US production, royalties, licensing fees, and brand-value charges may still apply, limiting the effectiveness of tariff circumvention strategies.

This only strengthens the fact that scenario planning is critical. EU pharmaceutical companies must evaluate investments against multiple possible policies and market futures to ensure long-term viability.
 

Navigating the crosswinds: strategic actions for EU pharma

Uncertainty on both EU and US fronts will remain a defining feature of the coming years. To safeguard margins and protect the innovation pipeline, European pharmaceutical companies must embrace the new reality and learn to operate effectively within it.

This requires both short- and long-term actions across multiple domains:

Go-to-Market Intelligence Hub: In the short term, we strongly advise installing a Go-to-Market (GTM) Intelligence Hub that helps pharmaceutical companies quickly adjust GTM strategies based on changing realities, considering implications beyond just commercial aspects.

Rethinking commercial, supply chain, and tax setup: In the mid-term (but to be actioned upon immediately), the historically well-built setup of EU pharma’s operating models needs to be reshaped to align with new realities covering commercial, supply chain, tax, and other considerations.

Public affairs: Finally, it is key to actively engage with policymakers to discuss constructive ideas on how to best shape the long-term future landscape of the industry.

These actions will not only lead to a reoriented strategic playbook for EU pharmaceutical companies, but also a positive shift in the EU market’s competitiveness and capacity for innovation.