US Biotechs Hesitant on European Licensing Deals Amid Drug Pricing Controversies

US biotechnology companies are increasingly reluctant to license their drugs to European partners, fearing potential backlash from the Trump administration's drug pricing initiatives. This development comes as pharmaceutical companies face growing pressure on both sides of the Atlantic over drug pricing and access.

Trump's Most Favored Nation Policy Impacts Licensing Decisions

The Trump administration's Most Favored Nation (MFN) drug pricing system, set to take effect on September 29, 2025, aims to match US prescription drug costs with the lowest prices offered in other developed nations. This policy has created uncertainty in the industry, with US biotechs now seeking greater control over European rights to their drugs during licensing negotiations.

Emmanuelle Trombe, co-head of McDermott Will & Schulte's life sciences industry practice, noted that discussions about protecting European franchises have become ubiquitous in licensing talks. "It's coming [up] in every discussion now: How do you protect the European franchise? If you can drive market access in Europe with a lower price, how do I make sure that my US franchise is not impacted?" she explained.

UK Pricing Dispute Intensifies Access Concerns

The debate over drug pricing disparities has reached a critical point in the UK, with several major pharmaceutical companies announcing plans to scale back or pause R&D funding in the country. This move comes in response to recent government pricing negotiations that increased the proportion of sales of newer branded medicines that pharmas must pay back to the UK's National Health Service from 15.5% to 31.3%.

Sharon Lamb, head of McDermott's UK healthcare practice group, described the industry's reaction as "a long time coming," highlighting the growing tension between government efforts to control healthcare costs and pharmaceutical companies' desire to maintain profitability.

Investment Trends Shift Amidst Pricing Pressures

Despite the challenging environment, investors at the Healthcare Private Equity Europe 2025 conference in London expressed cautious optimism about the sector's outlook. Paul Tomasic, head of European healthcare at Houlihan Lokey, noted a shift in investor focus away from early-stage drug development towards "growth-driven businesses" in medtech and healthcare services.

Tomasic also highlighted renewed interest in technology-driven solutions for drug discovery, citing AlphaFold, an artificial intelligence system developed by Google DeepMind, as an example of how investors are exploring ways to leverage data in drug research.

As the pharmaceutical industry navigates these complex pricing and access issues, the landscape of drug development, licensing, and investment continues to evolve. The coming months will likely see further adjustments as companies and governments seek to balance innovation, access, and economic considerations in the global healthcare market.