Global Trade Shocks and Exchange Rate Effects on Pharmaceutical Reference Pricing: Implications of EU Stimulus for US MFN Policy
Author(s)
Noman Paracha, MSc1, Danilo Di Maio, MHA, PharmD, PhD2, William Vincent Padula, PhD3.
1Quantic, Basel, Switzerland, 2Roche, Basel, Switzerland, 3University of Southern California, Rancho Palos Verdes, CA, USA.
1Quantic, Basel, Switzerland, 2Roche, Basel, Switzerland, 3University of Southern California, Rancho Palos Verdes, CA, USA.
OBJECTIVES: Recent U.S. tariff announcements have renewed EU trade tensions, causing unexpected euro appreciation against the dollar. The U.S. Most Favored Nation (MFN) pharmaceutical pricing strategy benchmarks to EU countries. This work explores how EU stimulus responses to export shocks could create upward pricing pressure affecting both regions.
METHODS: Using GDP identity (GDP = C + I + G + (X − M)), we assess EU responses to weakened exports through domestic demand stimulus. We examine increased government spending, healthcare budgets, and inflationary pressures from stimulus-driven demand expansion. We model how euro-denominated price changes, combined with EUR/USD appreciation, influence U.S. MFN benchmarks.
RESULTS: EU stimulus expands healthcare funding with dual effects: increased demand-side pricing pressure through enhanced coverage, versus cost containment via HTA reform and procurement. However, stimulus-induced inflation creates upward momentum on pharmaceutical pricing, particularly for innovative therapies with low demand elasticity. Increased healthcare budgets, wage inflation, and general price increases drive drug prices higher even within cost-containment frameworks. An appreciating euro amplifies modest EUR price increases in USD terms, potentially raising U.S. reference benchmarks significantly.
CONCLUSIONS: The interaction of tariffs, EU stimulus, currency appreciation, and inflationary pressures creates systematic upward bias in pharmaceutical pricing. EU fiscal responses generate pricing pressure through healthcare budget expansion, general inflation, and currency effects. These changes—filtered through FX appreciation—could significantly reduce MFN's anticipated downward pressure on U.S. prices. This highlights the need for integrated modeling in global price referencing, accounting for stimulus-driven upward bias in reference countries. Economic models informing MFN for U.S. drug prices should include a time-dependent covariate to adjust for the dynamic exchange rate between currencies.
METHODS: Using GDP identity (GDP = C + I + G + (X − M)), we assess EU responses to weakened exports through domestic demand stimulus. We examine increased government spending, healthcare budgets, and inflationary pressures from stimulus-driven demand expansion. We model how euro-denominated price changes, combined with EUR/USD appreciation, influence U.S. MFN benchmarks.
RESULTS: EU stimulus expands healthcare funding with dual effects: increased demand-side pricing pressure through enhanced coverage, versus cost containment via HTA reform and procurement. However, stimulus-induced inflation creates upward momentum on pharmaceutical pricing, particularly for innovative therapies with low demand elasticity. Increased healthcare budgets, wage inflation, and general price increases drive drug prices higher even within cost-containment frameworks. An appreciating euro amplifies modest EUR price increases in USD terms, potentially raising U.S. reference benchmarks significantly.
CONCLUSIONS: The interaction of tariffs, EU stimulus, currency appreciation, and inflationary pressures creates systematic upward bias in pharmaceutical pricing. EU fiscal responses generate pricing pressure through healthcare budget expansion, general inflation, and currency effects. These changes—filtered through FX appreciation—could significantly reduce MFN's anticipated downward pressure on U.S. prices. This highlights the need for integrated modeling in global price referencing, accounting for stimulus-driven upward bias in reference countries. Economic models informing MFN for U.S. drug prices should include a time-dependent covariate to adjust for the dynamic exchange rate between currencies.
Conference/Value in Health Info
2025-11, ISPOR Europe 2025, Glasgow, Scotland
Value in Health, Volume 28, Issue S2
Code
SA47
Topic
Health Policy & Regulatory, Study Approaches
Topic Subcategory
Decision Modeling & Simulation
Disease
No Additional Disease & Conditions/Specialized Treatment Areas