Donald Trump wants Americans to pay less for prescription medicines. To that end, the US president has struck deals with several multinational drugmakers, among them Swiss giants Roche and Novartis. The companies have agreed to cut prices on new, patented drugs in the United States and to invest more heavily there. In return they will be spared tariffs for three years—duties that are not yet in force, but which Mr Trump has threatened to impose.
The price cuts matter. New, patented medicines are precisely where American revenues are highest, thanks to the absence of price controls. Under a new most-favoured nation (MFN) approach, US prices would be pegged to the lowest levels found in a selected group of countries. That would squeeze margins in the world’s largest drug market and pull value creation from Switzerland to the United States.
Two pressures on Swiss prices
One obvious consequence may be felt in Switzerland itself. The country is among those used as benchmarks for the MFN system, giving pharmaceutical firms an incentive to keep Swiss prices high. Reference pricing, however, is not straightforward. In the United States, one method—the so-called GLOBE model—uses a basket of prices from 19 countries, Switzerland included. Small changes in one market can ripple through others.
In addition, higher prices at home and countries other than the US would help offset lost revenues in America.
Industry associations are already lobbying for changes to how prices are set locally. They argue that regulators focus too much on costs and too little on therapeutic benefit. They also want faster approval procedures, warning that delays erode returns on innovation.
A threat of withdrawal
There is another risk. If Switzerland becomes unattractive because of tight pricing, firms could choose not to launch new medicines there at all. Fewer launches would mean less research, fewer clinical trials and, eventually, a diminished appeal for researchers and leading clinicians to work there. What begins as a pricing dispute could spill over into Switzerland’s role as a research and manufacturing hub.
What is at stake
The stakes are potentially high. Pharmaceuticals are Switzerland’s standout industry, which directly and indirectly makes up around 9.8% of GDP according to a report by BAK Economics AG.
A study by Wellershoff & Partner paints a similar picture: over 30 years, pharmaceutical output shrank in only two, compared with eight contractions for the economy as a whole. Even in lean years, the sector usually outperformed others.
The sector is also a major source of tax revenue. Wellershoff & Partner estimates that Mr Trump’s policies could ultimately cost Switzerland around CHF 10bn in lost taxes—corporate levies as well as income taxes from highly paid staff who might relocate, reported SRF.
The industry is too central to Switzerland’s economy, and the American market too important to Roche and Novartis, for either side to ignore the pricing debate. The consequences will not be immediate. But by 2026 the outlines of the industry’s future—on both sides of the Atlantic—may start to come into view.
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