US Pharmaceutical Pricing Ultimatum and the Evolving Drug Value Assessment Landscape

The US Administration Ultimatum Demands Radical Price Cuts by September 29

On July 31, 2025, the US President escalated his campaign against high U.S. drug prices by issuing ultimatum letters to 17 major pharmaceutical companies, demanding they implement “most favored nation” (MFN) pricing within 60 days or face government intervention. This unprecedented move intersects with a rapidly evolving U.S. healthcare landscape where value-based pricing, Health Technology Assessment (HTA), and drug price negotiations are fundamentally reshaping how pharmaceuticals are priced and reimbursed. The September 29, 2025 deadline represents both an immediate crisis and a long-term inflection point for the industry.

The ultimatum letters, posted publicly on the US President’s Truth Social account and even read aloud at a White House press briefing, contain four specific demands that would fundamentally restructure U.S. pharmaceutical pricing.

Demand 1: Existing Portfolio MFN Pricing

Pharmaceutical companies must provide their full portfolio of existing drugs at MFN prices to all Medicaid patients — MFN pricing means matching the lowest price offered in any other developed nation.

Demand 2: Launch Price Guarantees

Drug manufacturers must guarantee that Medicare, Medicaid, and commercial payers receive MFN prices on all new drugs at launch, establishing international price parity from day one.

Demand 3: Revenue Reallocation Requirements

Pharmaceutical companies must use the increased revenues from what the US president calls “foreign freeloading nations” (his term for countries with lower drug prices) to directly lower U.S. prices through explicit agreements benefiting American patients and taxpayers.

Demand 4: Direct-to-Consumer Distribution

Pharmaceutical manufacturers must establish direct-to-consumer sales mechanisms, effectively bypassing pharmacy benefit managers (PBMs) and other intermediaries, to ensure all Americans can purchase medications at MFN prices.

The immediate market reaction was severe. The S&P 500 Pharmaceuticals Industry Index fell nearly 3% on July 31, and individual companies exposed to international price disparities saw even steeper drops. For example, shares of Sanofi plummeted by over 8%, while Bristol Myers Squibb and Novo Nordisk each fell about 5%, and Merck and GSK about 3%. Industry groups PhRMA and BIO sharply opposed the president’s price control demands, warning they would “undermine American leadership” in biopharmaceutical innovation. They instead pointed to supply-chain intermediaries as the real cost culprits, noting that pharmacy benefit managers and others “take nearly 50% of the costs of our medicines” via rebates and fees.

Market impact metrics

• S&P 500 Pharmaceuticals Index fell nearly 3% on July 31
• Sanofi shares plummeted over 8%
• Bristol Myers Squibb and Novo Nordisk each fell about 5%
• Merck and GSK declined approximately 3%

Industry Response Spectrum

Despite the market reaction, some pharma executives showed openness to the concept of global price alignment. AstraZeneca’s CEO Pascal Soriot, for instance, agreed that drug pricing needs to “equalize” across countries. “The United States cannot build or carry the cost of R&D for the entire world,” Soriot said, endorsing the idea that drug prices need to rise elsewhere and contribute more to research and development costs. Novartis likewise indicated it was exploring ways to meet the administration’s MFN goals, with CEO Vas Narasimhan describing “productive, very open dialogue” with U.S. officials on solutions to equalize or lower U.S. prices, even if a final resolution would “take time”.

Healthcare policy experts note, however, that the president’s authority to unilaterally enforce MFN pricing is highly limited. “The president, however, does not have the legal authority nor the regulatory tools to require drugmakers to sell their products at ‘Most Favored Nation’ prices in any market,” said Spencer Perlman, director of health policy research at Veda Partners. The president can pressure companies and direct federal agencies to test pricing models, but outright mandates would almost certainly face legal challenges. Indeed, the president’s similar MFN initiative in his first term — an attempt to base Medicare Part B payments on an international price index — was blocked by multiple federal courts and ultimately rescinded by the Biden administration in 2021.

The Fragmented U.S. HTA System Creates Unique Challenges

Unlike most developed countries, the United States lacks a single national HTA program. Instead, it operates through a complex, decentralized landscape of public and private HTA processes.

Private Insurer Assessments

Each private and commercial insurer conducts its own internal health technology assessment (HTA) to decide whether and under what conditions to cover new therapies, through Pharmacy and Therapeutics (P&T) committees. These assessments determine formulary placement, prior authorization requirements, and coverage restrictions. Evidence standards vary significantly across insurers. These processes often occur behind closed doors with varying evidence standards, leading to duplication of effort and inconsistent decisions.

Public Payer Programs

Medicare, Medicaid, the Veterans Administration (VA), and Department of Defense (DoD) each maintain separate evaluation processes. The Centers for Medicare & Medicaid Services (CMS) now performs HTA-like functions for Medicare through the Medicare Drug Price Negotiation Program established by the Inflation Reduction Act of 2022. The absence of a unified framework reflects the U.S. preference for market-oriented solutions, but it also creates significant inefficiencies and a lack of transparency in how value is determined.

ICER’s Advisory Role

Amid this patchwork, the Institute for Clinical and Economic Review (ICER) has emerged as the closest thing to an independent national HTA body. ICER conducts rigorous evaluations of drugs’ clinical effectiveness and cost-effectiveness, often using quality-adjusted life year (QALY) thresholds similar to England’s NICE (typically in the range of $100,000–$150,000 per QALY). However, unlike NICE — whose guidance is binding for Britain’s National Health Service — ICER’s recommendations are advisory only and carry no direct authority to set U.S. prices or coverage. Despite this, ICER has gained considerable influence. Its well-publicized reports and value-based price benchmarks inform negotiations between drugmakers and payers, and have fueled public debate over what constitutes a “fair” price.

Federal Government’s HTA Functions

The Inflation Reduction Act fundamentally altered CMS’s role in value assessment, allowing the federal government to edge into HTA-like roles. Under the new Medicare Drug Price Negotiation Program, CMS is directed to consider each drug’s therapeutic benefits and comparative clinical effectiveness when negotiating prices for Medicare. In doing so, CMS analyzes clinical trial data and real-world evidence much as HTA agencies do, to determine if a drug offers enough incremental value to justify its cost.

What CMS must consider

• Each drug’s research and development costs
• Manufacturing and production costs
• Existing market revenues and unit sales
• Patent status and remaining exclusivity periods
• Availability of therapeutic alternatives
• Clinical benefit relative to existing treatments
• Extent of unmet medical need addressed

The FDA, for its part, maintains its traditional mandate of assessing safety and efficacy for approvals, but it increasingly coordinates with CMS on coverage and evidence generation issues (for example, aligning requirements for post-market studies or “coverage with evidence development” programs for certain accelerated approvals). Meanwhile, virtually every large private payer now has its own HTA-like committee reviewing new drugs, and 85% of U.S. payers say they would welcome a national assessment body to provide consistent evidence standards.

Industry Adaptation Requirements

For pharmaceutical companies, preparing for U.S. market access has become a daunting exercise in multi-front navigation. Manufacturers must produce comprehensive HTA dossiers that can satisfy not just one decision-maker, but many. Companies often begin compiling these evidence packages 24–30 months before launch. Many start with a core global value dossier (sometimes modeled after the NICE submission templates) as a foundation, then adapt and expand it to meet the unique requirements of various U.S. stakeholders — from ICER to each major insurer’s formulary committee.

Core value dossier evidence components

• Systematic literature reviews (SLRs) of all relevant clinical evidence
• Direct and indirect treatment comparisons (ITCs) versus standard of care
• Cost-effectiveness models incorporating QALY calculations
• Budget impact analyses for 3–5 year horizons
• Real-world evidence (RWE) from early access programs
• Patient-reported outcomes demonstrating quality of life improvements

Value-Based Pricing Transforms Pharmaceutical Economics

The concept of value-based pricing (VBP) — tying a drug’s price to the value it delivers in health outcomes — fundamentally differs from traditional cost-plus or purely market-driven pricing models. In recent years, at least six innovative VBP models have gained traction in the U.S. and abroad:

• Financial risk–based agreements: The manufacturer refunds or discounts the drug’s cost if certain expenditure thresholds or patient spending caps are exceeded.
• Health outcomes–based contracts: The price paid (or rebate amount) is tied to the drug achieving agreed clinical targets in real-world patients.
• “Mortgage” models for curative therapies: Instead of one-time exorbitant payments, insurers pay for ultra-expensive cures over time.
• Subscription models (“Netflix model”): A flat fee for unlimited use of a therapy for a population over a period.
• Indication-specific pricing: The same drug costs differently for different uses, reflecting varying value across indications.
• Volume-based agreements for preventive therapies: Lower prices in exchange for broader population usage.

Concrete Examples in Practice

AstraZeneca & Harvard Pilgrim (Outcomes-Based): AstraZeneca struck an outcomes-based agreement with Harvard Pilgrim for the heart drug Brilinta, where AstraZeneca would adjust pricing based on patients’ hospital readmission rates for acute coronary syndromes. The logic: Brilinta is intended to reduce heart attack recurrence and related hospitalizations; if patients taking the drug still end up in the hospital at a higher-than-expected rate, AstraZeneca provides additional rebates.

Washington State Hepatitis C Initiative (Subscription Model): In 2019, Washington announced a “Netflix model” contract with AbbVie for hepatitis C drugs, aiming to eliminate HCV in the state by 2030. The state pays a fixed annual fee and in return can treat an unlimited number of Medicaid and prison inmates with AbbVie’s antiviral Mavyret.

GSK’s Trobalt in France (Outcomes Guarantee): In France, regulators approved GSK’s epilepsy drug Trobalt under an innovative agreement: GSK would not be paid at all for the drug until a patient had been on therapy for 12 months, to ensure it was effective for the patient. Furthermore, if a patient stopped Trobalt within the first 4 months due to lack of efficacy or side effects, the French health system would receive a full refund for the drug’s cost; if the patient stopped between 5 and 12 months, GSK would be paid only a prorated amount equivalent to the cost of existing alternative treatments. This essentially guaranteed that France only paid the premium price if the new drug delivered sustained benefit over standard therapy.

Impact of the Inflation Reduction Act

IRA Medicare negotiation results

• First round: Average price reduction of 22% per drug
• Negotiated discounts ranged from 38% to 79% off list prices
• Projected Medicare savings: $6 billion in 2026
• Beneficiary out-of-pocket savings: $1.5 billion
• Second round targets 15 additional drugs affecting 5.3 million enrollees
• Second round drugs account for $40.7 billion in Part D spending

Meanwhile, the U.S. Inflation Reduction Act (IRA) of 2022 has accelerated a broader shift toward value and affordability. The first round of Medicare drug price negotiations — for 10 high-cost Part D drugs whose new prices take effect in 2026 — yielded an average price reduction of about 22% per drug compared to current Medicare costs. In aggregate, these lower prices are projected to save Medicare roughly $6 billion in 2026, and beneficiaries an additional $1.5 billion in out-of-pocket costs. The negotiated discounts off each drug’s list price ranged from 38% up to 79%, indicating Medicare was able to secure substantial concessions, especially on drugs that had seen very high U.S. to international price gaps.

The second round of negotiations, for prices effective in 2027, will target 15 additional drugs — a list that CMS announced in January 2025 including blockbuster diabetes and obesity medications like Ozempic and Wegovy (semaglutides) among others. These 15 drugs were used by 5.3 million Medicare enrollees and accounted for $40.7 billion in Part D drug spending in the past year. Negotiations in 2025 will determine how much prices for this group will drop by 2027.

The criteria laid out for Medicare’s negotiation process explicitly incorporate multiple value factors — the statutory framework directs CMS to consider each drug’s R&D and manufacturing costs, its existing market revenues, patents and remaining exclusivity, the availability of therapeutic alternatives, and the clinical benefit and unmet need addressed by the drug. In short, even the U.S. government is now in the business of assessing a drug’s value and leveraging that assessment to set pricing, something that was anathema in the U.S. system just a few years ago.

Global Pricing Pressures Demand a New Approach

Pharmaceutical manufacturers must now navigate complex global networks of price references, negotiations, and regulations. A high launch price in one country can trigger ripple effects — reference price cuts elsewhere, or exclusion from formulary in a cost-sensitive market — more rapidly than ever. Trade tensions add another layer: for instance, the president’s threats of tariffs on drugs from countries he deems “freeloaders” is an unconventional lever, but illustrates that drug pricing is now entangled with trade policy.

The only sustainable response for companies is to demonstrably prove the value of their medicines. As pricing pressures intensify globally, the ability to justify a drug’s price with robust evidence has become the decisive factor in achieving and maintaining market access.

HTA Preparedness: The Gateway to Market Access Success

In this new reality, Health Technology Assessment preparedness has emerged as the critical gatekeeper of pricing and reimbursement decisions. Agencies and payers expect compelling proof of real-world patient benefit and cost-effectiveness, not just modest clinical trial results. Companies must now prepare comprehensive dossiers 24–30 months before launch, including systematic literature reviews, comparative effectiveness data, cost-utility analyses, budget impact forecasts, and patient-reported outcomes.

The European Union’s new Joint Clinical Assessment (JCA) regulation raises the stakes further: starting in 2025 for oncology and advanced therapies, manufacturers must submit a single clinical evidence dossier that satisfies all EU member states simultaneously — with tight timelines and hundreds of PICO variations. The lesson transfers directly to the U.S.: fragmented or reactive evidence generation no longer suffices anywhere.

HTA-readiness essentials

• Early scientific advice engagement with HTA bodies and payers
• Evidence generation plans designed around payer decision criteria, not just regulatory endpoints
• Robust indirect treatment comparisons where head-to-head trials are absent
• Living systematic reviews that keep the evidence base continuously current
• Real-world evidence strategies initiated at or before launch

Strong Value Evidence Drives Pricing Success

The empirical record is clear: drugs backed by strong comparative evidence and well-constructed economic models command better formulary positions, fewer restrictions, and more durable pricing. Conversely, products that arrive with thin evidence face immediate discounting pressure, prior-authorization barriers, and — increasingly — public price benchmarking by ICER and CMS.

What is clear is that going forward, any drug launching in the U.S. will face intense scrutiny on value. The days of setting a price based on what the market will bear are ending.

Strategic Imperatives for Market Access Executives

• Institutionalize HTA-grade evidence synthesis: treat systematic reviews and ITCs as core strategic assets, refreshed continuously rather than rebuilt per submission.
• Model payer decisions before they happen: simulate committee deliberations and negotiation outcomes to set defensible launch prices and anticipate restrictions.
• Align global pricing strategy: assume U.S. and ex-U.S. prices will be compared explicitly; plan reference-pricing exposure into launch sequencing.
• Prepare for direct government negotiation: build IRA-style negotiation dossiers for any Medicare-exposed asset well before selection.
• Invest in real-world value demonstration: outcomes-based contracting readiness requires data infrastructure capable of tracking agreed endpoints.

The Intersection of the Price Ultimatum with Evolving Value Frameworks

The US administration’s ultimatum is a symptom of a larger shift: the U.S. is no longer an outlier willing to pay any price. It is converging with other nations that demand proof of value for the money. The aggressive pricing ultimatum is not a one-off political gambit — it signals a fundamental shift in the ground rules of the U.S. pharmaceutical market.

The message to drugmakers is that they must demonstrate their products’ worth, or others will dictate their price. At the same time, the maturation of value-based pricing models and HTA processes means the tools and metrics to measure that worth are becoming more standardized and influential.

Leading Through Value Demonstration in a Transformed Market

For pharmaceutical companies, the implication is clear: they can no longer rely on fragmented, reactive approaches to justify their prices. Winning in this environment requires treating value demonstration as a continuous, enterprise-level capability — one that spans evidence synthesis, health economics, payer analytics, and negotiation strategy.

Loon’s AI-powered platforms are built for exactly this shift: Loon Lens™ automates HTA-grade evidence synthesis with validated, calibrated accuracy, and Loon Waters™ simulates payer committee deliberations to forecast reimbursement outcomes and conditions before filing. Together they let market access teams prove value faster, and with more rigour, than the new rules demand.