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Against this backdrop, the Most-Favored-Nation pricing is further adding pressures to cut drug spending. In an executive order signed in May 2025, the Trump administration set out to tie what the United States pays for a drug to the lowest price charged in a comparable wealthy country, with targets benchmarked to the lowest price in any OECD nation whose per-capita GDP runs at least 60% of America’s. Manufacturers have a path to comply voluntarily or face rulemaking and tariffs. As of April, the administration said it had reached agreements with 17 of the largest drugmakers.
The Most-Favored-Nation (MFN) pricing is “definitely driving a reevaluation,” said Amber Siddique Hussain, Director of Finance at Dr. Reddy’s Laboratories. With the stated goal of ensuring that the U.S. should not pay more for a drug than other comparable countries, “prices are effectively ‘benchmarked’ to the lowest levels seen globally,” Siddique Hussain said.
In the following Q&A, Siddique Hussain discusses how manufacturers are responding to these pressures through tighter cost discipline and operational efficiencies. For more from Siddique Hussain on drug cost mechanics, see his earlier essay, From list price to net price: How finance leaders decode real drug costs, which unpacks why headline prices rarely reflect what payers and providers actually pay.
Can you provide an example of how MFN pricing is influencing pricing flexibility and cost-management priorities?
Amber Hussain Siddique, the Director of Finance for Dr. Reddy’s Laboratories North America
Siddique Hussain: For example, if a drug is priced at $100 in the U.S. but sold at $60–70 in countries like Germany or Canada, MFN-type policies would push U.S. pricing closer to that lower range. Similarly, in some European markets where governments negotiate aggressively, prices can be significantly lower, and MFN ties U.S. pricing to those benchmarks.
Because of this, pharmaceutical companies have less flexibility to rely on higher U.S. pricing to offset lower margins elsewhere. As a result, there is a much stronger focus on internal cost discipline—whether it’s optimizing supply chains, managing inventory more efficiently, or controlling operating expenses—to maintain profitability while continuing to support access to affordable medicines.
What types of financial strategies are pharmaceutical manufacturers employing to deliver affordable medicines in the United States?
Siddique Hussain: Generics operate on very thin margins due to intense competition, unlike branded pharmaceuticals. This makes it extremely important for companies to continuously evaluate their cost structures and expense strategies, especially in an environment where annual price erosion in generics can be as high as 10–12%.
As a result, financial strategy plays a critical role across multiple areas. Companies are focusing on end-to-end cost optimization—from raw materials, excipients, and packaging activities to manufacturing overheads. There is also a strong emphasis on supply chain efficiency, logistics optimization, and better inventory management to reduce waste and working capital.
In addition, disciplined control over operating expenses and increasing use of data-driven decision making are helping identify further efficiencies. The overall goal is to improve cost efficiency so that affordability can be sustained without compromising quality or supply continuity.
Can you go into a little detail about each of these strategies?
Siddique Hussain: Starting with product-level costs, companies are taking a very granular approach—closely evaluating raw materials, excipients, and packaging to identify savings opportunities without compromising quality. This includes working with multiple sourcing options, conducting additional API validations, and continuously improving manufacturing processes to enhance yields. Many companies are also bringing more procurement activities in-house to reduce supplier margins and overhead costs. In some cases, they are even investing in supplier facilities through tech-transfer or process improvements so that suppliers can produce more efficiently and offer better pricing. Even small improvements at this level can have a meaningful impact given the scale.
On the supply chain side, there is a strong focus on optimizing sourcing and logistics. Companies are diversifying their supplier base to reduce risk while improving transportation efficiency. For example, shifting from air freight to sea routes—where feasible—can significantly reduce costs, sometimes by up to three times. There are also operational improvements such as redesigning pallet structures to enable double stacking and better space utilization during transportation.
Inventory management is another key area. Companies are becoming more precise in balancing supply and demand—avoiding excess inventory that ties up capital while also minimizing losses due to expiry or short-dated products. This often involves continuous monitoring of excess stock and regular cross-functional reviews with supply chain, marketing, and warehouse teams to identify ways to liquidate excess inventory—whether through new customers, discounted sales, or even donations to avoid destruction costs.
From an operating expense perspective, there is increased discipline around discretionary spending, including travel, consulting, and subscriptions. Many organizations are shifting toward building internal capabilities instead of relying heavily on external consultants or law firms.
Have the Covid years been the impetus for any of these strategies and if so, why have they continued to be implemented?
Siddique Hussain: Covid was definitely a turning point. It exposed vulnerabilities in supply chains and highlighted the importance of resilience and cost control. Many of the strategies that were adopted during that time—such as tighter inventory management and diversified sourcing—have continued because they proved to be both effective and necessary in maintaining supply continuity while managing costs.
Is there any particular group or healthcare business that benefits the most from these financial strategies?
Siddique Hussain: Ultimately, these strategies benefit the broader healthcare system, but they have a particularly meaningful impact on cost-sensitive segments. This includes patients with limited financial access, especially those covered under programs like Medicaid and, to some extent, Medicare, where affordability and cost control are critical.
On the provider side, safety-net hospitals, community hospitals, and independent pharmacies tend to benefit the most. These organizations often operate under tighter budget constraints and rely heavily on affordable generic medicines to manage costs. By improving cost efficiency at the manufacturer level, there is a downstream benefit in terms of pricing stability, which helps these providers continue delivering care without compromising access for vulnerable patient populations.
Ultimately, these efficiencies play a direct role in maintaining pricing stability and ensuring continued access to affordable medicines for vulnerable populations.
Are there any financial strategies on the horizon that you foresee that will make significant changes in delivering affordable medicines in the United States?
Siddique Hussain: Looking ahead, I think we’ll see deeper integration of financial strategy with advanced analytics and more real-time decision-making. Companies are moving toward dynamic cost management—for example, adjusting production plans, sourcing strategies, and inventory levels based on changing demand and pricing conditions.
There is also a growing focus on end-to-end visibility across the value chain. Instead of managing costs in silos, organizations are connecting procurement, manufacturing, supply chain, and commercial data to identify inefficiencies and optimize decisions more holistically.
Another area that will continue to evolve is closer collaboration with suppliers and partners. We’re already seeing more joint initiatives around cost improvement, process efficiency, and long-term sourcing strategies, which can create more sustainable cost structures.
Overall, these approaches are helping companies become more agile and disciplined, which will be critical in managing ongoing pricing pressures while continuing to improve access to affordable medicines.
How has global sourcing evolved over the past several years and how do you see it continuing to evolve?
Siddique Hussain: Global sourcing has evolved significantly over the past several years. Earlier, the primary focus was on cost efficiency, but today it is much more balanced, with equal emphasis on reliability, supply security, and risk management. The COVID-19 pandemic was a major turning point, as it exposed vulnerabilities in global supply chains and highlighted the risks of over-reliance on a limited number of regions for critical inputs like APIs.
Since then, companies have been actively diversifying their supplier base to reduce dependency and build more resilient networks. There is also a clear shift toward supporting “Make in America” initiatives. Given the U.S.’s continued reliance on imported pharmaceutical products and raw materials, along with recent geopolitical and tariff-related pressures, companies are reassessing their sourcing strategies and increasing focus on strengthening domestic manufacturing capabilities.
At the same time, sourcing strategies are becoming more forward-looking and resilient. Rather than focusing purely on short-term cost advantages, companies are building more balanced supply networks that combine global sourcing efficiencies with increased investment in local and regional production. The goal is to create a more stable and self-sustaining supply chain that can better withstand disruptions while continuing to support access to affordable medicines.
Going forward, I expect this trend to continue, with sourcing decisions increasingly driven by a combination of cost efficiency, geographic diversification, regulatory considerations, and long-term supply security. In many ways, sourcing is no longer just a cost decision—it has become a strategic lever for long-term sustainability and supply assurance.
Has AI played a role in delivering affordable medicines, and how do you see its role in the future?
Siddique Hussain: AI is starting to play a meaningful role, particularly in areas like demand forecasting, inventory optimization, and cost analytics. It helps identify patterns and inefficiencies that might not be visible otherwise. Looking ahead, I think AI will become an important enabler in improving decision-making speed and accuracy, which can ultimately contribute to better cost management and more affordable medicines.
Beyond that, AI is also helping companies become more proactive rather than reactive. For example, it can support early identification of supply-demand imbalances, optimize production planning, and improve procurement decisions by analyzing large volumes of data in real time. This reduces excess inventory, minimizes stockouts, and improves overall operational efficiency. As adoption increases, AI has the potential to drive more consistent and scalable efficiencies across the value chain, which will be critical in sustaining affordability in a highly competitive and price-sensitive environment.
Filed Under: Legal precedents and interpretations, Regulatory affairs
