The shifting U.S. policy landscape: How biopharma should prepare

U.S. administration policy directives in 2025 have introduced significant uncertainty within the biopharma landscape. Changes in trade policy, regulatory agency structure and staffing, and public research funding have led to financial market unpredictability, uncertainty on the role and reliability of institutions, and questions about how the industry will sustain innovation. Additional positions taken by the administration or aligned entities foreshadow further impactful changes, including both how drugs are priced and marketed. Precisely predicting what the environment will look like and how or when it may change may be difficult. But the sheer number of potential actions makes it impossible for industry leaders to simply wait for these changes and then determine how to respond. The signature challenge for biopharma in this era is how to plan when it’s impossible to predict the specifics.

We lay out our perspective about the policy and regulatory themes that biopharma should be watching across the value chain. We suggest specific actions that industry leaders can take both in the near term and long term to position their businesses for whatever may emerge.

We see five core themes of potential U.S. policy change. If enacted, these changes would lead to significant effects that biopharma should organize its planning around:

1. Regulatory approval pace and review expectations
2. Manufacturing and the supply chain
3. Funding of innovation across basic research and early stage sourcing of business development opportunities
4. Drug pricing and reimbursement
5. Commercial promotion activities 

Biopharma is heavily reliant on predictable behavior from its regulators, most notably the U.S. Food and Drug Administration (FDA). Drugmakers collaborate with the FDA on clinical trial design, requirements for regulatory approval, regulatory filings and more. The rigorous regulatory review process creates commercial efficiency because payers and healthcare providers can rely on that stamp of approval as a strong indicator that prescription medicines have cleared a high efficacy and safety bar. The FDA’s long history as the world’s leading regulatory authority means that this bar effectively becomes the global one to clear for most major manufacturers.

This regulatory framework is at risk on multiple fronts. Staffing cuts within the FDA and departures of leading regulators like Dr. Peter Marks, the FDA’s former director of the Center for Biologics Evaluation and Research, make it difficult for biopharma actors to act with certainty—related to who they are supposed to engage with and what requirements they need to meet. These uncertainties could ultimately affect review processes and approval timelines for new medicines, as well as ongoing regulatory monitoring of approved ones (for example, regular quality and safety testing). Skepticism expressed by Secretary Kennedy about how biopharma funds the FDA via user fees could lead to further cuts or changes that drive even greater uncertainty.

Two particular treatment categories also stand out for further potential risk. Vaccines as a category are at risk, given Secretary Kennedy’s history of skepticism of their efficacy and safety. His messages in office have been mixed—for example, he continues to criticize vaccine efficacy and safety while also suggesting that people in the U.S. should get the measles vaccine in the wake of a deadly outbreak. Also at risk are treatments for chronic diseases like obesity and cardiovascular disease.

The “Make America Healthy Again” agenda explicitly positions prescription medicines as a less-desirable option to prevent and treat chronic disease. If this philosophy influences policy around FDA approval criteria, drug applications or indication expansions for many of pharma’s development assets are at risk. 

The prospect of tariffs on the importation of medicines could reshape biopharma’s complex supply chains. The degree to which that may take place will depend on several factors including the size of the tariffs; phase-in periods; details about what is being tariffed (for example, active pharmaceutical ingredients, packaging materials, fill and finish, etc.); variations in tariff rates by country; and any exceptions or exemptions.

The broader market has experienced significant uncertainty through a sequence of tariff announcements and rollbacks—initially in Canada, Mexico and China and then more recently across the globe. While pharmaceuticals were exempted from the “Liberation Day” tariff announcements and pauses, President Trump has indicated that tariffs would come to this sector as well.

Moving pharmaceutical manufacturing to the U.S. is a long-range investment, so the industry’s ability to react quickly to new tariffs is limited. Pricing laws for public sector health plans and payer or pharmacy benefit manager (PBM) contracts for many branded drugs in private coverage limit the industry’s short-term ability to pass added costs along. For generics, which largely lack these contracts, the impact is likely to happen more quickly. Generic manufacturers’ slim margins are unlikely to be able to absorb tariffs, leading to price increases, shortages or both.

The complexity of supply chains will make it hard to predict which drugs will be affected and how. In addition to increasing costs, there is a real risk of supply disturbances (either real or as a result of aggressive stocking in anticipation of disturbances), making it difficult for patients to receive the medications they need. New tariffs could have a substantial impact on drugmakers who manufacture their treatments outside the U.S. until prices and the supply chain can adapt over multiple years. 

Historically, the U.S. federal government has played a significant role in research and development that has been a key basis for biopharma innovation. As of 2022, U.S. federal government spending was the largest source of basic research funding in the U.S. (See Figure 1 from the U.S. National Science Foundation, which notes that the federal government funded 39% of research in 2022—greater than private businesses at 37% and higher education at 13%.) Between 2010 and 2019, NIH-funded research directly or indirectly contributed to 99% of FDA-approved drugs.

The industry has structured its own research and development activities around government activity. In fact, it has evolved to rely upon public funding studies as the basis of scientific exploration for its own programs. For example, the discovery of GLP-1 drugs was in part driven by NIH-funded studies on Gila monsters and how their venom could mimic human hormones that controlled appetite. Funding cuts made to the NIH, NSF, DARPA, DoE and VA could affect pharma’s ability to depend on basic research. Funding freezes at major research universities and potential favoritism for some topics of research over others at the direction of the federal government could change what research is ultimately conducted. Some countries have already attempted to fill in the gap—for example, the U.K.’s plan to increase basic medical research.

Current and proposed policies affecting trade and capital flows have already and will continue to affect how innovation moves across countries. The administration’s tariff policy toward China will inherently limit the ability of U.S. and Chinese companies to work across borders on scientific and clinical research, as companies reconsider how they source goods and services. Proposed limits by the administration on active Chinese investor control over U.S.-based entities may limit which innovations from China make it to the U.S. Similarly, proposed capital controls of the U.S. government may limit the ability of U.S.-based investors to invest in Chinese-based biopharma.

If biopharma is partly cut off from its current leading sources of early clinical innovation, the industry will need to develop new capabilities that plug this gap, or they risk thinning out their pipelines. 

In 2020, the first Trump administration proposed to use the Centers for Medicare & Medicaid Services (CMS) demonstration project authority to create a “Most Favored Nation” (MFN) drug price policy, where reimbursement paid under Medicare Part B would be tied to drug prices in other countries. The Biden administration declined to enact this project. The Trump-adjacent “America First Policy Institute” responded with its publication of a policy brief titled “Put Americans First by Ending Global Freeloading.” In the brief, the authors argue that the U.S. spends more than its share on pharmaceutical innovation, while other wealthy countries do not pay their fair share.

The second Trump administration made this policy official by signing an executive order on May 12, 2025. This ties U.S. medicine prices to the lowest prices paid by other developed countries, defined by those with a gross domestic product (GDP) per capita of at least 60% of the U.S.’s GDP per capita.

Regardless of whether this policy succeeds in extracting additional funding from other countries, most of the proposed solutions start with the U.S. paying significantly less and assume that increased payments elsewhere would inherently follow. The financial risks from such an MFN policy will depend on how broadly they are applied (for example, just in the government-reimbursed sectors or universally), as well as on the specifics of the policy. (For example, would the U.S. get the lowest price that any country gets, or a price related to an average price from a basket of wealthy countries?)

Given that the biopharma industry garners much of its revenue and most of its profit from the U.S., significant pricing actions represent a substantial financial risk. And considering that leading biopharma companies reinvest approximately 20% of their revenue back into R&D, it is easy to see how such pricing actions could meaningfully affect future innovation, as well.

The most prominent policy question from a commercialization perspective is whether direct-to-consumer (DTC) advertising will be banned. If so, would that include all forms of consumer promotion, or would it be limited to linear TV? During the 2024 presidential campaign, Secretary Kennedy promised to ban pharmaceutical advertising, both when waging his own campaign and later after he threw his support behind Donald Trump. In June 2025, Senator Bernie Sanders and Senator Angus King introduced the End Prescription Drug Ads Now Act, which would prevent drugmakers from promoting prescription drugs through television, radio, print, digital platforms and social media.

Pharmaceutical companies spend approximately $18B in media each year in the U.S., which is one of the only countries that allows branded DTC advertising. ZS analysis places the ROI on that spend typically in a 2:1 to 3:1 range. Banning much or all of that spend will not only create significant revenue gaps—particularly for brands that invest heavily in consumer campaigns—but it will also require drugmakers to reshape their marketing strategies, tactics and budgets. It is unlikely that drug manufacturers could achieve the same level of return without significantly different investments and effectiveness improvements, given the highly scalable nature of the DTC channel. 

Each of these areas of potential change would, individually, merit significant planning and response. Collectively, the scale and possible impact of this change may feel paralyzing. But we believe that biopharma should take several steps to best meet the moment. We lay out three suggestions for near-term actions and four others for longer-range change.

Action 1: Plan contingencies around higher-likelihood events

Some of these policy changes are likely enough that biopharma leaders should initiate some contingency planning now. For example, the prospect of a partial or complete ban on DTC advertising may take place, which would affect some brands that spend significantly in that channel. Those brand leaders should consider alternate marketing mix contingencies and opportunities to shift branded campaigns to unbranded disease awareness actions, while also assessing their revenue risk.

Across each area of potential change, drugmakers should identify the possibilities that they perceive to be reasonably likely, high impact and partially addressable—then develop contingency plans around those areas. The exact plans and focus areas will vary from one company to the next. For example, imagine one drugmaker considers an MFN pricing policy in Medicare Part B, likely based on the 2020 CMS demonstration project template, and they have an impending launch for a related drug. That company may want to consider the timing of the global launch to manage the risk of unfavorable pricing references. It may also need to model different scenarios of international price referencing that would affect the U.S. price to prepare for international price and access negotiations. By contrast, this would not be relevant for drugmakers that only have pharmacy benefit treatments in their late-stage pipeline.

Action 2: Make preparedness an enterprise capability

The unpredictability of the moment flips typical organizational preparation activities on their head. In the typical case, companies look to develop a set of future scenarios and then identify the actions they might take if one of those futures emerges. Running such scenario planning efforts today is of little use because it’s unlikely this planning approach will predict a sufficiently close version of the future environment.

Rather than preparing for discrete scenarios, drugmakers should seek to build broad preparedness as an enterprise capability. This would entail focusing less on the “what” of responding to a change and more on the “how.” In other words, when a significantly impactful change emerges or is announced, how exactly should the organization mobilize for swift, appropriate action? Much like typical scenario planning, enterprises can practice this type of preparedness to build their muscle memory.

Preparedness as a capability focuses on practicing and building organizational nimbleness. One technique to consider is conducting a set of “fire drills” with surprise announcements of a major, impactful change. While participants would be aware of the concept, most would not know the details or timing in advance, helping simulate a real surprise event. Participants would need to practice aligning the organization to respond to the event while navigating the typical business-as-usual activities of the day (rather than, for example, blocking a half day in advance for a “war game” exercise). Leaders would then debrief and focus on learnings about how rapidly and effectively the organization mobilized, as well as how to improve their agility in the future.

Action 3: Increase advocacy and influence

While many of these potential policy and regulatory changes may bring risks for biopharma, there is evidence that effective advocacy can influence the current administration’s rhetoric and policy direction. Secretary Kennedy needed to commit to a less-harsh view of vaccines to secure U.S. Senate confirmation. The “Liberation Day” tariffs have been largely put on pause. A clear pattern emerges across many domains of governance where the Trump administration makes announcements and then evolves its position following public reaction.

Biopharma policy advocates must shape their arguments in the context of the Trump administration’s views and positions. For example, rather than pushing back on tariffs because it would take too long to shift manufacturing to the U.S., identify what it may take to have more U.S.-based production and suggest policies that could facilitate it. This may require reassessing and reshaping many of the typical claims made by industry leaders to ensure that they align with known government priorities. Enlisting other more-sympathetic stakeholders in the ecosystem will be important. For example, while “big pharma” is distrusted, doctors have better public reputations. Oncologists are heavily reliant on biopharma innovation to treat patients effectively. They can be a powerful voice speaking to the positive patient impact of the new medicines that have entered the market in the past 15 years. 

Action 1: Repair biopharma’s image

Biopharma’s poor public image has been a longstanding issue, but the bipartisan nature of the industry’s unpopularity is an increasingly existential risk. Gallup’s annual survey of public approval for different industries places pharmaceuticals last, and the only industry with an approval rating that lags that of the federal government. In our current political era, policymakers from both parties will likely align themselves with the overwhelming majority of the public that has negative views of biopharma.

Addressing that image problem cannot be solved overnight. It requires a sustained campaign aimed at winning more of the public’s hearts and minds. While this has been a known issue for many years, it has never been more urgent to make progress on it than it is now. The industry has an amazing story of accomplishments to tell, whether it’s the number of deaths avoided, huge advances in cancer care or tremendous quality of life benefits for those suffering from immunological or age-related conditions, to name just a few. Investments to identify and deploy the highest impact ways of telling this story may have a greater impact on sustaining a vibrant innovation ecosystem than any other potential area of spend.

Action 2: Prepare value chains for deglobalization

Ensuring patients can receive the medicines they need is a top priority for the pharma industry. Given today’s geopolitical environment, stable global access, global cooperation and inexpensive global trade is no longer a certainty. Pharma should critically evaluate both the discovery and development process as well as its supply chains to understand the source of each key element in the value chain process, identify substitutes when possible and generate a geographically (and politically) diverse capability.

For research, discovery and development, biopharma needs to assess where political risks may affect its ability to source and move innovation across borders. For example, if particular technology developments are happening in a single geography, what is the chance that improvements in that technology are cut off by virtue of trade, capital control or other policy (“walled-off science”)? If a company is running a cross-border trial, what are potential actions that could affect its completion (for example, tariffs or bans on CRO or CDMO relationships like the BIOSECURE Act)? How is redundancy (other research areas, trial sites, etc.) built into the process? Is the organization’s financing, business development and M&A strategy overly dependent on cross-border activity that may be at risk for disruption? By contrast, there may be some organizations that are able to use these changes to their advantage (for example, Europe, Japan or China-based companies with limited-to-no U.S. business). How will these organizations increase their exposure to take advantage of opportunities that may see less competition for capital and deals than before?

The building of new manufacturing will require both investment and time, so it is urgent to get started soon to ensure a continuous and stable supply of drugs.

Action 3: Develop new sources of early stage innovation

If the U.S. government reduces its funding of basic science, biopharma will need to identify or develop alternate means for sourcing new drug candidates. Other countries or regions could conceivably fill the void as a means of competing with the U.S., or basic research could shift into the private sector. Companies may also need to consider other structures such as consortia, alliances and partnerships with NGOs and higher education to fill in the gap, but they will still face questions on the role of basic research as a private versus public good.

Private sector basic research would represent a dramatic change from the status quo where much of the starting knowledge feeding into drug discovery is democratized, rather than proprietary. Biopharma will need to develop new competencies to operate in this environment, as well. Basic research is often the proving and recruiting ground of biopharma today. Companies may need to assess when and how to move this function within their own walls to continue funding it.

Action 4: Plan future portfolios around geographic diversity

The biopharma industry today largely revolves around the U.S. market, given that the U.S. is responsible for the majority of industry revenue and the overwhelming majority of its profits. Yet that reliance is also a risk, given that a deterioration in the U.S. environment would have a similarly outsized impact on industry performance.

Diversifying revenue sources will help mitigate risk in the U.S. market. This would require several important steps. During the portfolio planning stage, biopharma could explicitly consider the geographic diversity of its revenue, and not just its total revenue, as a key determinant of commercial opportunity. Planning for successful product launches would also require developing stronger commercial capabilities in a broader set of markets outside of the U.S., Europe and Japan. Biopharma should also advocate for more favorable innovation environments in existing major markets, such as what the Europe-based trade organization EFPIA has suggested in response to evolving U.S. and EU market dynamics. While this risk mitigation is important, we must note that the scale of growth required in other countries is a daunting challenge, given that biopharma revenue in the U.S. is more than five times greater than the second-largest market. 

While today’s uncertainties are unprecedented, biopharma leaders must take a clear-eyed look at their environment. They must plan for what can be planned while also taking longer-range steps to reshape external perceptions and the ecosystem in which they operate to ensure a continued, vibrant market for future innovation.

As you’re asking questions within your organization or pursuing your own scenario planning, reach out to us to talk through your options or to pivot your existing strategies. We’ve helped the world’s biopharma companies weather market changes in the past, and we’ll continue to guide them through similar changes now and in the future. Connect with one of our experts at ZS today.