The first quarter of 2026 has been anything but quiet in the life sciences sector. Here are the top issues and trends we’ve noticed in the months since JPM.
MFN Pricing
MFN pricing continues to influence global deal strategy as companies worry that lower ex‑U.S. prices could flow back into the U.S. through MFN or reference‑pricing mechanisms. We are seeing increased questions from biotech companies on whether they can legitimately ask their overseas commercial partners to delay launches or even forego certain markets to avoid creating low reference prices.
On the flip side, we are seeing increased questions from big pharma partners on whether it is reasonable to ask for a royalty step-down if MFN pricing is imposed in the US, and whether delaying entry into key markets due to the risk of reference pricing will breach diligence obligations. Uncertainty around the MFN pricing structure is increasing deal complexity—and timelines to signing—as companies try to draft for these unknown risks.
U.S. Investigations into China
The ITC has opened a fact‑finding investigation into Chinese state support and pricing practices in biotechnology, and how these may affect market share and competitiveness of U.S. companies across the life sciences industry.
For the industry, the immediate impact is uncertainty. Companies that depend on China‑based CDMOs, CROs, or platform providers are digesting the recent pharmaceutical tariffs (see below) and are watching for possible procurement limits, or other trade measures that could affect cost of goods, supply continuity, and long‑term partnering. The investigation will also feed into congressional debates on “biotechnology companies of concern” and on reshoring or “friend‑shoring” critical capabilities. Dealmakers should—to the extent they don’t already—factor potential China‑related trade actions into how they structure long‑term supply, manufacturing, and partnership arrangements.
New Section 232 Tariffs on Pharmaceuticals
On April 2, 2026, President Trump issued a proclamation under Section 232 of the Trade Expansion Act of 1962 imposing 100% tariffs on imports of patented pharmaceutical products and their associated ingredients, effective July 31, 2026, for certain listed companies and September 29, 2026, for all other companies. Patented pharmaceutical products include those covered by a valid, unexpired U.S. patent and listed in the FDA’s Orange Book or Purple Book, excluding generics and biosimilars.
Several mechanisms allow for reduced rates: (1) companies with an approved “onshoring plan” may qualify for a 20% rate, (2) companies with both an approved plan and an MFN pricing agreement with HHS may qualify for a 0% rate until January 20, 2029, (3) company‑specific tariff agreements already concluded with 13 companies are recognized, and (4) certain countries with trade deals (e.g., Japan, EU, South Korea, Switzerland, Liechtenstein, and UK) benefit from lower tariff rates on covered products.
Big Pharma Out‑licensing to China and Australia
Historically we’ve seen big pharmas out-license their assets for commercialization in China and, of course, in the last five years we’ve seen a massive increase in in-licenses of development stage assets from China. Now, however, we are seeing growing interest from big pharma companies around out‑licensing their development-stage assets to partners in China and Australia. The attraction is faster development and approval timelines, more flexible regulatory pathways, and access to large, treatment‑naïve patient populations in China and efficient early‑stage trial infrastructure in Australia.
Based on what we are hearing from clients, we expect the trend to continue over the course of 2026. However, it does create new sets of negotiation points between collaboration partners, with the inherent complexity of split territory deals combined with China-specific geopolitical issues (including the specter of NRDL reference pricing) again pushing out transaction timelines.
AI‑enabled R&D Collaborations
Life sciences companies are increasingly in-licensing access to external AI platforms to support target identification, lead optimization and de novo design. Economically, these arrangements look different from traditional R&D licensing and collaboration models. Instead of a large upfront, and milestones and royalties tied to a defined product, we are seeing platform access fees, committed funding for a scoped workplan executed by the AI partner, and ongoing platform services fees, to ensure continued support and development of AI‑generated candidates. However, we are also seeing these AI platform companies continue to push for traditional R&D economics (e.g., milestones and royalties), with mixed outcomes.
Another notable trend is the “try‑before‑you‑commit” approach. Many companies are starting with narrow pilots or proof‑of‑concept studies to benchmark the AI platform against internal tools and validate integration, before agreeing to multi‑target or multi‑year collaborations. We see a lot of negotiation focus on the AI platform company’s ongoing rights to use data generated in these pilot studies. We expect to see further innovation in risk‑sharing, economic structures and data rights as parties refine these models.
Antitrust & HSR
The FTC has remained focused on life sciences enforcement—which has led to the abandonment of Alcon’s proposed acquisition of LENSAR (cataract surgery lasers) and a court‑ordered preliminary injunction blocking Edwards Lifesciences’ acquisition of JenaValve (heart‑valve devices).
Additionally, at a conference in March, the Director of the FTC’s Bureau of Competition underscored the agency’s focus on identifying anticompetitive practices in pharma, particularly as several blockbuster drugs approach major patent cliffs. While this comment was centered on monitoring conduct, and not necessarily tied to deal decisions, it’s possible the FTC uses the HSR process during M&A review to “fish” for these potential conduct issues.
On HSR, there has been some relief for dealmakers. The U.S. Court of Appeals for the Fifth Circuit denied the FTC’s emergency motion to stay a district court ruling vacating the expanded February 2025 HSR form. Parties can again use the pre‑February 2025, less burdensome form (with the option to use the new form if they wish).
That older form will remain in effect unless and until the FTC successfully appeals on the merits, modestly reducing filing complexity even as substantive risk persists. It will likely take the Fifth Circuit several months to issue a ruling on the merits. The median time for a ruling from the Fifth Circuit is approximately 8-9 months from filing a notice of appeal (which in this case happened in February 2026).
Finally, pharma companies in Europe are closely watching a referral from the Romanian High Court to the Court of Justice of the EU on when joint lobbying through trade associations can cross into cartel conduct. The case stems from a 2022 decision fining several drugmakers for allegedly coordinating to restrict immunoglobulin supply to pressure the government to suspend a clawback tax on plasma‑derived medicines.
The Romanian court has asked the EU judges to clarify whether industry‑wide discussions about the impact of a sector-wide tax (particularly where there is no uncertainty in the market) can constitute evidence of a concerted practice, and how competition authorities must assess alternative economic explanations for product withdrawals. The Romanian authority maintains it sanctioned coordination of commercial conduct, not lobbying per se. The ruling will be closely watched given the prevalence of trade‑body engagement on reimbursement schemes in other jurisdictions and may influence how companies structure and document trade‑association activities across the EU.
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Many thanks to the numerous Freshfields lawyers who contributed to this piece.
