On May 12, 2025, President Trump signed Executive Order 14297, “Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients” (the Executive Order).¹ The Executive Order describes a “purposeful scheme” in which drug manufacturers discount prices abroad to preserve market access and recoup the difference through higher prices in the U.S. It aims to align U.S. drug prices with those paid in other comparable nations.

Since the Executive Order, most-favored-nation (MFN) drug pricing has become a prominent topic in U.S. pharmaceutical policy, and life sciences companies have begun to contemplate ways to structure cross-border partnerships in light of the policy. Because MFN can tie the price a manufacturer charges in the U.S. to the prices it accepts abroad, pricing decisions made outside the U.S., often by a party the U.S. rights holder does not control, may now erode U.S. value. This advisory addresses that exposure and the related antitrust and tariff considerations.

The Current MFN Landscape

As of August 31, 2026, the Trump administration has reported agreements with 26 manufacturers, which it states cover 89 percent of the branded drug market.² The specific terms of these agreements have not been made public, including the pricing mechanics and product scope of any individual manufacturer’s commitment.

At its core, MFN pricing ties the price a manufacturer may charge in the U.S. to the lowest price that manufacturer charges for the same product in economically comparable, developed countries. Under the current framework, such countries are primarily Organization for Economic Co-operation and Development (OECD) member states with a gross domestic product (GDP) per capita of at least 60 percent of the U.S. GDP per capita.³ This captures countries within the EU as well as the UK, Canada, and Australia.

Rather than a single, self-executing rule, the MFN pricing framework has taken shape as a mix of (i) voluntary, manufacturer-by-manufacturer agreements, as discussed above, and (ii) formal rulemaking through the Centers for Medicare & Medicaid Services (CMS), including three models: the GUARD Model (Medicare Part D),⁴ the GLOBE Model (Medicare Part B),⁵ and the GENEROUS Model (Medicaid).⁶ Each would benchmark covered drugs against prices in economically comparable countries and require manufacturers to pay rebates when U.S. prices exceed those benchmarks.

These models are at different stages of implementation. The GENEROUS Medicaid Model is in effect, and it is voluntary for both manufacturers and states. The model runs January 1, 2026, through December 31, 2030, and operates through CMS-negotiated supplemental rebate agreements. Manufacturers report international prices, states invoice quarterly for a rebate reflecting the gap between the U.S. price and the international price, and CMS and the states share the resulting savings.⁷

While the GUARD Model for Medicare Part D remains proposed, CMS finalized the GLOBE Model on September 30, 2026, as a mandatory model for certain Medicare Part B drugs and biologics. It will run for five years beginning January 1, 2027, and ending March 31, 2032, and will apply to beneficiaries who reside in a randomly selected subset of geographic areas, encompassing approximately 25 percent of total Medicare beneficiaries who have Original Medicare as their primary coverage. The GLOBE Model also excludes orphan-only drugs, biosimilars, plasma-derived products, and certain cell and gene therapies.⁸

This MFN pricing framework represents a shift from the prior pricing framework in the U.S., which entailed manufacturers negotiating separately with a fragmented set of private insurers, pharmacy benefit managers, and hospital systems, and the government having limited ability to negotiate Medicare and Medicaid reimbursement rates and rebates directly with manufacturers.

How MFN Affects Cross-Border Deals

Cross-border collaboration and licensing deals have often been structured as territorial splits, with the U.S. party and the ex-U.S. party each setting prices in its own territory at its sole discretion. Under the MFN regime, however, the ex-U.S. net price can serve as a reference point that lowers the U.S. price, exposing the U.S. party to a pricing decision made by a counterparty it does not control and whose incentives may diverge from its own. This exposure cannot be sidestepped by arguing that the U.S. party does not set the ex-U.S. price. Some had suggested that firewalls preventing the U.S. rights holder from controlling ex-U.S. pricing might place a product beyond the reach of MFN, but the finalized GLOBE Model ties the reference price directly to the product’s ex-U.S. price regardless of which party controls that price.

Such exposure is not limited to split-territory arrangements. Even where a single party controls pricing globally (e.g., in a worldwide license), the licensor’s royalties and sales-based milestones on U.S. sales may be affected because the licensee’s low ex-U.S. pricing, or its choice to launch first in a reference-basket country, can lower the U.S. price on which those payments depend. A licensee that controls global pricing may have an incentive to maximize the U.S. price, which can partly mitigate this risk.

Cross-border agreements may include diligence obligations, such as a commitment to use commercially reasonable efforts to launch in one or more major ex-U.S. markets, with milestones tied to those launches. Satisfaction of such obligations could depress the U.S. price, so that meeting a diligence obligation could reduce the product’s overall value. In other words, a party that becomes entitled to a milestone upon the first commercial sale of the product in an ex-U.S. jurisdiction may, at the same time, inadvertently establish a contradictory result that depresses the U.S. price and erodes the product’s overall value in the global market.

For these reasons, parties negotiating new cross-border deals, or revisiting existing ones, may wish to build targeted contractual relief into their agreements. Where U.S. and ex-U.S. rights are split between parties, they may also consider mechanisms that align incentives, so that no single party bears the U.S. MFN risk alone. The allocation of MFN risk can also be addressed expressly rather than left unresolved. In addition, a company acquiring or in-licensing U.S. rights to a product may want to conduct thorough diligence on whether the product is subject to an MFN agreement and what pricing, reporting, and consent obligations would come with it.

Targeted contractual relief must be tailored to the specific deal, but common approaches may include: (i) reducing the royalty rate payable to the ex-U.S. rights holder if MFN pricing comes to apply; (ii) providing the ex-U.S. rights holder a royalty on U.S. sales, or another payment, to compensate it for declining to enter, or for delaying entry into, ex-U.S. markets whose pricing would erode the U.S. price; and (iii) granting the U.S. rights holder a right to buy out the ex-U.S. rights, whether globally or for particular countries. A mechanism that runs in the opposite direction, i.e., requiring the ex-U.S. rights holder to pay the U.S. rights holder, or reducing the royalties it receives, when its actions erode the U.S. price, may not work financially because the profit available in the ex-U.S. markets may be too small to make the U.S. holder whole for the lost U.S. pricing.

Antitrust Considerations

There has been no publicly known antitrust enforcement activity to date. Parties may seek to address the value-eroding effects of the MFN regime through various arrangements in their agreements. Those arrangements, however, may raise antitrust risks. Such parties should consider antitrust risks in the affected reference-basket countries that could be triggered by the following examples:

• Provisions in licensing deals seeking to give the licensor control or influence over the licensee’s ex-U.S. pricing—EU member states and the UK generally prohibit practices by which a seller or licensor seeks to ensure that buyers/licensees do not sell the relevant product below a certain price (Minimum Resale Price Maintenance, or RPM). While recommending resale prices is generally acceptable, any efforts to control a licensee’s pricing, whether directly or indirectly, are high risk. Examples of indirect RPM include sanctions for pricing outside a certain range, or termination provisions linked to observance of recommended prices.
• Setting prices in the reference countries by a company controlling pricing globally at a level that may be considered “excessive” because of its detachment from value, costs, or the pricing of similar products—this is particularly relevant with respect to deals involving orphan drugs or drugs for rare diseases with limited alternatives, where authorities in Europe have pursued investigations and imposed sanctions on companies for “excessive pricing” in recent years.⁹
• Withdrawing products from, or not launching products in, markets where there are no alternatives.

Companies considering any of these practices or provisions in their agreements should consult with their antitrust counsel.

Tariff Considerations

In April 2026, President Trump announced a 100 percent ad valorem tariff on imports of certain patented pharmaceutical products and associated active pharmaceutical ingredients (APIs).¹⁰ With some limited exceptions, the 100 percent tariff became effective in July 2026 for certain specified companies and in September 2026 for all other companies.

Included in the limited exceptions was a functional exemption (0 percent tariff) through January 20, 2029, for products of companies that executed MFN pricing agreements with the Department of Health and Human Services and have onshoring plans for manufacturing and research and development approved by the Department of Commerce. The stated goal of the limited exceptions was to encourage the onshoring of pharmaceutical manufacturing and to promote greater domestic self-sufficiency in order to prevent potential global supply chain disruptions that could limit Americans’ access to medications. On the import side, there is an incentive for companies to enter into these agreements.

Key Takeaways

Three practical steps for life sciences companies to consider:

• Parties may wish to revisit existing collaboration and license agreements for ex-U.S. launch and diligence obligations, so that no party is contractually compelled to take an ex-U.S. action that would, on balance, reduce its own financial return on the product.
• Companies should consider MFN risks when deciding how to structure a transaction. For example, parties may wish to weigh a territorial split of U.S. and ex-U.S. rights against a worldwide license or acquisition that leaves pricing under the control of a single party. Where a split structure is still pursued, companies may wish to address the allocation of MFN risks expressly, while also accounting for the antitrust risks that the mitigation mechanisms may raise.
• Companies that sell branded pharmaceuticals and their APIs may wish to review the available tariff reductions and carve-outs, together with the terms of any MFN pricing agreement, when evaluating their options.

For more information, please contact any member of Wilson Sonsini Goodrich & Rosati’s Technology Transactions and Life Sciences practices.

---

[1] Executive Order 14297, “Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients” (May 12, 2025), https://www.whitehouse.gov/presidential-actions/2025/05/delivering-most-favored-nation-prescription-drug-pricing-to-american-patients/.

[2] The White House, “Fact Sheet: President Donald J. Trump Announces Deal with Nine Additional Pharmaceutical Manufacturers to Lower Drug Prices for Americans” (August 31, 2026), https://www.whitehouse.gov/fact-sheets/2026/08/fact-sheet-president-donald-j-trump-announces-deal-with-nine-additional-pharmaceutical-manufacturers-to-lower-drug-prices-for-americans/.

[3] Press Release, U.S. Department of Health and Human Services, “HHS, CMS Set Most-Favored-Nation Pricing Targets to End Global Freeloading on American Patients” (May 20, 2025), https://www.hhs.gov/press-room/cms-mfn-lower-us-drug-prices.html.

[4] Centers for Medicare & Medicaid Services, GUARD (Guarding U.S. Medicare Against Rising Drug Costs) Model, available at https://www.cms.gov/priorities/innovation/innovation-models/guard (last visited October 6, 2026).

[5] Centers for Medicare & Medicaid Services, GLOBE (Global Benchmark for Efficient Drug Pricing) Model, available at https://www.cms.gov/priorities/innovation/innovation-models/globe (last visited October 6, 2026).

[6] Centers for Medicare & Medicaid Services, GENEROUS (GENErating cost Reductions fOr U.S. Medicaid) Model, available at https://www.cms.gov/priorities/innovation/innovation-models/generous (last visited October 6, 2026).

[7] Centers for Medicare & Medicaid Services, GENEROUS Model (GENErating cost Reductions fOr U.S. Medicaid Model), available at https://www.cms.gov/priorities/innovation/files/generous-rfa.pdf (last visited October 6, 2026).

[8] Press Release, Centers for Medicare & Medicaid Services, “CMS Finalizes New Mandatory Drug Payment Model to Deliver Lower Drug Prices for Beneficiaries in Original Medicare Part B” (September 30, 2026), https://www.cms.gov/newsroom/press-releases/cms-finalizes-new-mandatory-drug-payment-model-deliver-lower-drug-prices-beneficiaries-original.

[9] Andrew Morrison, Deirdre Carroll, and Jindrich Kloub, “Drug Rulings Clarify Pricing Test and Penalty Reviews,” Law360 (August 28, 2026), https://www.wsgr.com/en/insights/law360-article-drug-rulings-clarify-pricing-test-and-penalty-reviews.html.

[10] Presidential Proclamation, The White House, “Adjusting Imports of Pharmaceuticals and Pharmaceutical Ingredients into the United States” (April 2, 2026), https://www.whitehouse.gov/presidential-actions/2026/04/adjusting-imports-of-pharmaceuticals-and-pharmaceutical-ingredients-into-the-united-states/.