Trump’s MFN Drug Pricing Mandate: How to Play the Regulatory Minefield

The Biden administration’s 2025 Most-Favored-Nation (MFN) Drug Pricing Mandate—reinvigorated by President Trump’s executive order—has thrown the pharmaceutical sector into a regulatory tailspin. While the policy’s stated goal of aligning U.S. drug prices with global benchmarks sounds like a win for consumers, its implementation faces staggering legal and logistical hurdles. For investors, this creates a high-stakes game of identifying firms most vulnerable to price caps and those poised to thrive through regulatory chaos. Here’s how to navigate the minefield.

The Regulatory Landscape: A House of Cards?

The MFN mandate’s survival hinges on overcoming two existential threats:
1. Legal Vulnerabilities: The 2020 iteration was struck down by courts for procedural violations, and the 2025 version faces similar challenges. Critics argue the order exceeds executive authority, particularly regarding tariffs on non-compliant drugmakers and direct-to-consumer drug imports. Legal experts predict swift injunctions on key provisions, potentially neutering the mandate’s bite.
2. Practical Impossibility: Global pricing data is fragmented—many U.S.-approved drugs aren’t sold in comparably wealthy nations, and foreign price controls lack transparency. The FDA’s proposed drug importation framework also faces safety and supply-chain hurdles.

The Most Vulnerable Firms: Medicare Part B’s Prime Targets

The mandate’s focus on Medicare Part B drugs—administered in clinical settings—has exposed four major players to near-term and long-term risks:

1. Merck & Co. (MRK): Keytruda’s Double-Edged Sword

• Risk: Keytruda, Merck’s blockbuster cancer drug, derives ~30% of U.S. sales from Medicare Part B. While its price caps won’t hit until 2028, Medicare inflation rebates (in effect since 2023) are now being invoiced, forcing Merck to reimburse Medicare for price hikes exceeding inflation.
• Resilience: A $18 billion pipeline (including immuno-oncology and cardiovascular therapies) and global Keytruda sales (60% of revenue outside the U.S.) buffer against U.S. pricing pressures.

2. Regeneron Pharmaceuticals (REGN): Eylea’s Geographic Dependency

• Risk: Eylea, a leading macular degeneration treatment, accounts for ~40% of U.S. sales. Its reliance on Part B and high U.S. pricing (up to $10,000 per injection) make it a prime target.
• Resilience: Eylea’s 60% international sales (Europe/Asia) and expanded uses (e.g., diabetic retinopathy) provide a safety net.

3. Roche (RHHBY): Oncology Portfolio at Risk

• Risk: Avastin and Herceptin—critical to Roche’s oncology portfolio—generate ~25% of U.S. sales. Even a delayed 2028 price negotiation timeline threatens margins.
• Resilience: 75% of revenue comes from non-Part B markets (e.g., China’s 15% YoY growth in 2025), plus a robust pipeline in neuroscience and gene therapies.

4. Novo Nordisk (NVO): Ozempix’s Pricing Spotlight

• Risk: Ozempix, a GLP-1-based obesity drug priced ~200-300% higher in the U.S. than abroad, faces scrutiny under MFN. Litigation risks loom as courts grapple with cross-border pricing comparisons.
• Resilience: Ozempix’s global success (Europe/Asia) offsets U.S. pressures, though its litigation exposure remains a wild card.

Contrarian Plays: Where to Bet on Regulatory Resilience

While the mandate’s legal hurdles create volatility, certain firms offer asymmetric upside:

Roche (RHHBY): Diversification as Defense

• Why Buy: Its 75% non-U.S. revenue and China’s booming biologics market ($2.4B in 2025) provide insulation. The FDA’s recent approval of its Alzheimer’s drug lecanemab adds near-term catalysts.
• Valuation: Trading at 14x forward P/E versus the sector’s 16x average, it’s undervalued despite its pipeline.

Regeneron (REGN): Riding Global Growth

• Why Buy: Eylea’s European/Asian dominance and a pipeline rich in rare disease therapies (e.g., efgartigimod for autoimmune disorders) position it to outperform.
• Valuation: At 12x P/E, it’s a bargain, especially if U.S. litigation over Part B drugs peters out.

Merck (MRK): Pipeline-Powered Stability

• Why Buy: Its $18 billion pipeline (including an mRNA cancer vaccine and diabetes treatments) offers long-term growth. Investors often overlook its diversified revenue (only 30% from Part B).
• Valuation: At 16x P/E, it’s fairly priced but offers downside protection via its global footprint.

Actionable Insights for Immediate Portfolio Repositioning

1. Sell Short Overexposed Biotechs: Avoid pure-play Part B firms like Jazz Pharmaceuticals (JAZZ) or Acceleron Pharma (XLRN), which lack global buffers.
2. Buy the Dip in Resilient Giants: Use dips in Roche or Merck (post-legal challenges headlines) to accumulate stakes.
3. Leverage ETFs for Diversification: Consider the iShares U.S. Healthcare ETF (IYH) to capture sector-wide rebounds while avoiding single-stock risk.
4. Monitor Legal Milestones: Track rulings on tariffs and FDA importation authority—any injunctions could trigger a sector-wide rally.

Conclusion: Regulatory Fog Equals Opportunity

The MFN mandate’s uncertain fate creates a “buy the rumor, sell the news” dynamic. Investors who focus on firms with global pricing buffers, diversified pipelines, and minimal Part B exposure will outperform. As courts chip away at the mandate’s teeth, the sector’s volatility offers a rare chance to profit from fear—and bet on resilience.

The chart highlights NVO’s recent dip amid Ozempix pricing fears—a potential entry point for contrarian investors.

Investors: Act now before the next legal ruling reshapes the landscape.