Most Favored Nation Pricing & Bringing Pharmaceutical Manufacturing Home:

Discussion of high drug prices, shortages and brining pharma manufacturing home has been an ongoing subject and it is discussed in every Congress. Executive orders (too many to cite) have been issued and nothing has changed. Interference besides pharmaceutical companies comes from TORS. Who are TORS? They are Distributors, Regulators, Legislators and Litigators. Each has financial interest and do what they can do to derail any and every progress. 

 

Current administration has issued Executive Orders ^(1,2,3) and we will have to see if anything happens as there are many vested interests in their way to prevent their implementation. Perspective presented is unbiased and not influenced by an for profit and non-profit organization. 

 

To get to Most-Favored-Nation pricing and bring pharma manufacturing home, the current business model along with how pharmaceuticals are distributed in the United States will have to change. All of these are going to be a challenge. Companies with about 2.5 TRILLION dollar revenue (pharmaceutical benefit managers (distribuTORS), pharmaceutical companies, health insurance etc.) will exert every bit use of political influence on (legislaTORS), litigaTORs and RegulaTORS. Reason is very simple. Too much distribution disruption and relearning pharma’s development and manufacturing capabilities can be avoided by money if status quo can bought. However, if the current US administration forces the issue, things will have to change staring from pharma’s methods (product development, manufacturing) and regulatory approval methods. Distribution will be disrupted. Alternate approval methods will have to considered and implemented ⁽⁴⁾.  

 

For the last twenty years I have discussed manufacturing technology issues and published solutions in articles, my blog and books. Manufacturing processes of the Active Pharmaceutical Ingredient (API) and their formulations are bench top processes. I call them round bottom flask and mortar and pestle processes. They could be easily fitted in the equipment of the age and have been the main stay of pharma manufacturing.

Most of the chemical synthesis manufacturing processes and methodologies are batch processes fitted in the existing equipment. Reasons and rational are simple. Minimize investment. There are other ways improve manufacturing process that also minimize investment, discussed in the books. cGMP practices have to followed irrespective of the equipment used. Involvement of the VILLAGE from inception of the product can simplify the manufacturing processes i.e. lower cost. I am not going into the reasons and rationale but internal complacency, tradition and regulatory needs have been an impediment in use of better processing methods ^(5,6,7).  Process of continuous improvement does not exist in pharma manufacturing as each modification has to be approved by the regulators, a very expensive process. Result is companies are afraid to make even minor tweaks to the processes. 

 

To bring pharma manufacturing home and companies to profit their practices have to become current. Very creative and imaginative chemical engineers and chemists at the pharmaceutical companies with the cooperation of FDA can BRING PHARMA MANUFACTURING HOME. No such attempt has been made. Billions are being invested in antiquated methods and manufacturing technologies (too many to cite). These will not deliver what is expected by the current US administration.  

 

If any headway has been made at least it is not obvious. I am not sure about recent announcements for new plants that will come on stream in few years should be a consideration of bringing manufacturing home. This is a harsh observation but is a reality. Question is what do they do for US’s short term needs. It seems more of a public relation ploy in front of legislators and press. 

 

In order to bring manufacturing home, pharmaceutical companies have to proactive and be directed by a Pharma Czar ⁽⁸⁾ who directly reports to the President of the United States. Drug distribution methods and policies will need to be modified. Again undue influence of TORS will have to be warded off.  

 

Fitting processes not only has not only been less productive but also results in high emissions per kilo of the drug. Yes it minimizes investment but there are alternates. They can lower manufacturing costs and they need to be considered ^(4,5,6,9). Involvement of village would be necessary as after the fact ways that have been practiced have to go by the wayside. 

 

I have presented my perspective in the following and good, experienced chemists, chemical engineers and  business folks need to review. They can practice and/or modify to bring manufacturing home and lower drug prices. Following have been presented to bringing pharma manufacturing home and ways to improve profits. 

 

1.     Malhotra, Girish: ONE PAGE Road Map to Reduce Drug Shortages, Assure Quality and Improve Affordability December 6, 2019

2.     Malhotra, Girish: Health and National Security Issues for the USA and Is The United States of America Prepared May 8 , 2020

3.     Malhotra, Girish: A road map for driving pharmaceutical manufacturing back to the USA by 2025 October 8, 2020

4.     Malhotra, Girish: US’s Self Sufficiency for Generic Drugs: A Supply Dilemma and Potential Solutions March 31, 2022

5.     Malhotra, Girish: Roadmap to Reduce Drug Shortages and Bring Pharma Manufacturing Home (US) October 30, 2023

6.     Malhotra, Girish: Remedy of US’s Drug Supply Chain Shortages and Domestic Production of Generic and Brand Drugs April 15, 2025

7.     Malhotra, Girish: An Outlier Plan to Bring Pharmaceutical Manufacturing to USA in One Year April 28, 2025

8.     Malhotra, Girish: Implementing Executive Orders on Domestic Production of Critical Medicines and Achieve Most Favored Nation Pricing June 11, 2025

9.     Malhotra, Girish: An Unconventional Analysis: Can the Wrath of Most Favored Nation Pricing ⁽¹⁾ be Avoided by Bringing Pharmaceutical Product & Process Development and Manufacturing Practices to 21^st Century? July 8, 2025

 

To accomplish the objectives of MFN pricing ⁽²⁾ the MOST IMPORTANT AND CRITICAL item is that every manufacturing change and practice has to come INTERNALLY FROM THE PHARMACEUTICAL COMPANIES as they have command of their culture, process chemistries, understand their manufacturing landscape and every other detail. There are very many vested interests (regulators, consultants, contract manufacturing organizations) that will vie to meddle in but no one knows the business better than folks at the companies. Over the years many have stepped in with no results. Focus has to be razor sharp. Task is not going to be easy unless it is tried and tested internally nothing will change. Companies have the knowledge and what it will take to bring manufacturing home. With the resident talent and application of chemical engineering fundamentals, creativity and imagination the factory costs can be reduced, profits improved and profits improved ^{(5, 6, 7, 8).} We need to exploit them. Change has to come and is overdue. May the FORCE be with you. 

 

Girish Malhotra, PE

 

EPCOT International

 

1.     EO 14293 Regulatory Relief To Promote Domestic Production of Critical Medicines Accessed May 5, 2025

2.     EO 14297 Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients Accessed May 15, 2025

3.     Executive Order 14273 Lowering Drug Prices by Once Again Putting Americans First Accessed June 2, 2025

4.     Malhotra, Girish: ONE PAGE Road Map to Reduce Drug Shortages, Assure Quality and Improve Affordability  Profitability through Simplicity December 6, 2019

5.     Malhotra, Girish:  Active Pharmaceutical Ingredient Manufacturing: Nondestructive Creation De Gruyter April 2022

6.     Malhotra, Girish: Chemical Process Simplification: Improving Productivity and Sustainability John Wiley & Sons, February 2011

7.     Malhotra, Girish: Chapter 4  “Simplified Process Development and Commercialization” in “ Quality by Design-Putting Theory into Practice” co-published by Parenteral Drug Association and DHI Publishing© February 2011

8.     Malhotra, Girish: Profitability through Simplicity

An Unconventional Analysis:

Can the Wrath of Most Favored Nation Pricing ⁽¹⁾ be Avoided by Bringing Pharmaceutical Product & Process Development and Manufacturing Practices to 21^st Century?

I have shared my learnings and experiences in process development, technology innovation, manufacturing and business practices ^{(2, 3, 4, 5, 6)}. With the looming threat of lowering the selling prices of the brand drugs through EO 14297, in this post I am sharing what are some of the things companies need to considered to avoid its wrath. Forcing brand drug sale prices by 50% or so to match e.g. European prices will have a significant impact on the P&L of every brand pharma company. However, I perceive this an opportunity for the pharmaceutical companies to lower drug prices, enhance their profits through increased affordability. Effort will simultaneously improve manufacturing technologies and reduce their environmental impact. 

 

I am not suggesting to follow and/or do what I am sharing but let your imagination and creativity take you/us to create products and processes that are our best effort. Discussion is applicable to every chemical business (fine/specialty, coatings, their younger cousin Active pharmaceutical ingredients and their formulations).  Perspective presented is mine and is not influenced by any for profit and non-profit entity.

 

My review is based on cost analysis. Our understanding of costs can assist us to improve processes and methods to enhance profits. I am not challenging any methods but suggesting that as part of continuous improvement, review of the current methods and practices for every profit and cost center can lead us to improve profits. Every little improvement is worth the effort. Readers are welcome to share their thoughts. 

 

To avoid the wrath of Executive Order EO 14297 ⁽¹⁾ pharmaceutical companies will have to review their research and development, commercialization, manufacturing and business practices. I am sure that most companies, first blush, would say it cannot be done. However, unless an ongoing concerted effort is made, the current and upcoming US Government administrations can force change of the current practices and they may not be to our liking. Litigations will ensue.  

 

US Drug Prices vs. Rest of the World:

 

For that last number of years there has been a conversation about the high brand drug prices in the United States compared to other developed and underdeveloped countries. The explanation given by the pharma companies is that price for each brand drug are the highest in their effort to recover the product development costs ($1-2 billion). Everyone has bought this explanation and believe it to be true. However, no independent body/person, has been given a verifiable explanation/justification for these costs. Prices in other developed counties are lower as their healthcare systems have been able to negotiate the sale prices. Prices in developing countries are low just for sheer volume of drugs needed. They pay for the fixed costs and keep the factories operating. Law of economics tell us that no company runs a charity and no one is going to sell their products at a loss unless we all missed the explanation/s.  

 

Proposed EO 14297, if enforced, would influence the balance sheet of every brand pharma company. In Table 1 company “X’’’s real drug, not identified, is analyzed. At this writing the world population is about 8.2 Billion ⁽⁷⁾. US population (347 million ⁽⁸⁾), is slightly less than 5% of the global population. It is interesting, just for numbers sake, to compare the sales of this hypothetical drug in USA vs. rest of the World. Numbers are estimates but are close to the numbers for a real drug. Anyone can do a similar analysis for any drug. 

 

Numbers in Table 1 tell us a story. It is logical to conclude that if the Company “X” is selling the drug at an average sale price of $0.75 per tablet in other countries and is not losing any money. This prices is less than ten percent of the US selling price. Prices ⁽⁹⁾ in other countries range from $3.00 to $0.55 per day for the 5 mg tablet. If the company has a 50% margin (this includes local pharmacist’s profits), the lowest factory cost could be ~ $0.18 per 5 mg. (based on my manufacturing and costing experience) tablet which includes the API and inert excipients. With this being the case, US selling price in a mutually subsidized healthcare system is alarmingly high. 

 

	United States	Global	Total
Population	347,000,000	8,200,000,000	8,547,000,000
Percent using (assumption)	0.42	0.42
Tablets per yr.	531,951,000	12,570,600,000	13,102,551,000
Average Price /tablet, $	9.83	0.75
Revenue, $/yr.	5,229,078,330	9,427,9500,000	14,657,028,330
Tablet, mg	5	5
API needed Kilo/year, kg	2,700	62,853	65,553

 

Table 1: Sales of a Real (unidentified) Drug ⁽⁹⁾

 

Table 1 shows the amount of API is needed to satisfy US needs vs. rest of the world. USA population’s API needs are less than 10% of the global population’s needs. Even if it was 10%, still the API volume is small. Drug for US needs can be produced at a single site. API for US demand could be imported and formulated. However, the API for rest of the world is being produced outside US and its formulation taking place at one or more sites outside USA. Without the global market, US selling price of the drugs will be higher than the current prices. 

 

Pharma companies need rest of the world market to absorb the fixed costs and maximize their profits. Claim that US brand pharma bear the cost of new drug may be right but in reality rest of the world bears significant portion of the ongoing costs and that is not well understood and/or recognized. We have to acknowledge that the US sales volume is not large enough and the sales to other countries contribute to each line item of the balance sheet and maximize every company’s profits. In other words they contribute to keep Pharma companies in business. US alone cannot be in business of inventing new drugs. Simply it is a “mutual appreciation society”.  

 

Pharma companies suggest that to develop a new drug it can take up to TWO billion dollars. These numbers to me are a hearsay as I have not been able to verify these by an “independent” entity. If EO 14297 ⁽¹⁾ is implemented i.e. reduce the selling price for this drug by 50% in USA, it can wipe out significant funding for the discovery of a “NEW DRUG”. To recoup the loss would mean that pharma will have to look at each line item of its balance sheet i.e. how to conserve. This means business model change. 

 

Pharma: What to look for?

 

Pharma companies, if EO 14297 ⁽¹⁾ is implemented most likely will have to reconfigure their business model. Every “t” and every “i” will have to be meticulously crossed and dotted for marketing, sales, product and process development, and manufacturing. It is time to shed 50+ years old business model. It needs to change as the WORLD has changed.   

 

Marketing and sales expense along with every line item will have to be reviewed. My speculation is that if a new drug for a disease is more effective than any existing drug, it will sell by word of mouth. Advertising might have to be minimized and that will be a line item savings. Let the best drugs sell based on the efficacy and performance rather than force feeding what majority of the customers do not understand. 

 

Most likely Research and Development would have to be treated as a profit center instead of a cost center. This would require each company to review their product discovery, processes development and manufacturing methods to lower their costs. “Village”^{(2, 3, 4, 5, 6)}, unlike the current tradition, would have to be involved from inception of every product development as there will be no opportunities to re-invent and optimize the drug’s manufacturing processes after the product enters clinical trials and is commercial. Effort to re-invent the manufacturing process for a brand drug i.e. under patent would be expensive as the regulators most likely would ask to reconfirm its efficacy and characteristics. 

If the above is implemented pharma landscape will change from inception. My expectation is that complete command of the product and process will reduce the regulatory approval time and lead to longer NDA “in-patent” time meaning instead of patent expiring in approximate 10-12 years might get additional 4-5 years of patent life. This could compensate lost revenue due to EO 14297’s inclusion.

 

I don’t know how many chemists and chemical engineers associated with any pharmaceutical product, process development and manufacturing are familiar with the cost analysis but it would be enlightening and of great value if the VILLAGE ^{(2, 3, 4, 5, 6)} gets involved in the product development from the start of product discovery. It is expected that some of the village members would be able to share the value of “what if” of the product development, process stoichiometry and manufacturing before a sample is submitted for clinical trials. An optimized process before it is scaled up for rigorous testing does not take time. This information can and should be used to optimize the process and minimize its environmental ill-effects. (references).

 

My conjecture is that inclusion of EO 14297 ⁽¹⁾ on pharmaceutical landscape will be beneficial to the overall pharma landscape and could reduce drug shortages and lower prices. It is best if the pharma companies took the reins and saddled the horse. Government intervention should be the last resort. Direct marketing is another option. Besides pharma companies the biggest obstacle will be the US private sector, Pharmacy Benefit Managers (PBMs) who along with their influencers will make sure EO 14297 ⁽¹⁾ it is not implemented ⁽¹²⁾. 

 

Girish Malhotra, PE

 

EPCOT International     

1.  EO 149297: Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients  

2. Malhotra, Girish: Chemical Process Simplification: Improving Productivity and Sustainability, John Wiley & Sons, February 2011 
3. Malhotra, Girish: Chapter 4 “Simplified Process Development and Commercialization” in “ Quality by Design-Putting Theory into Practice” co-published by Parenteral Drug Association and DHI Publishing© February 2011
4. Malhotra, Girish: Research Report: Strategies for Improving Batch or Creating Continuous Active Pharmaceutical Ingredient (API) Manufacturing Processes, March 2017
5. Malhotra, Girish: Active Pharmaceutical Ingredient Manufacturing: Nondestructive Creation De Gruyter April 2022

6.   Malhotra, Girish: Profitability through Simplicity

7.   Current World Population https://www.worldometers.info/world-population/

8.   United States Population (live https://www.worldometers.info/world-population/us-population

9.   Pharmacy Checker.com  https://www.pharmacychecker.com/

10. Malhotra, Girish: Active Pharmaceutical Ingredient Manufacturing (API) and Formulation Drive to NET ZERO (Carbon Neutral)? Profitability through Simplicity, April 29, 2021

11.  Malhotra, Girish: NET ZERO for Active Pharmaceutical Ingredient & Fine/Specialty Chemicals: Nondestructive Creation, Profitability through Simplicity, November 7, 2024

12.  Malhotra, Girish: Implementing Executive Orders on Domestic Production of Critical Medicines and Achieve Most Favored Nation Pricing, Profitability through Simplicity, June 11, 2025