“Pharmadeals more and more dependent on regulatory due diligence”

Dutch version: https://mena.nl/artikel/hanneke-later-nijland-genome-lawyers-farmadeals-regulatory-due-diligence/

By: Jan Bletz

29 October 2025

In the heavily regulated pharma market, buyers face greater risks. Regulatory due diligence offers a solution.

·       Geopolitical shifts increase risks in the pharma sector: The US is closing itself off and implementing protectionist measures, China is developing into an innovative biotech power, and Europe remains fragmented with divergent pricing and regulatory systems.

·       Complexity in international deals requires a new approach: Investors and pharmaceutical companies must account for divergent laws and regulations, national interests, and price differences in acquisitions and partnerships – making transactions considerably more complicated and risky.

·       Regulatory due diligence becomes a strategic key instrument: A thorough analysis of regulations regarding prices, safety, imports, licenses, and reimbursements is crucial to limit risks and protect deal value.

America is closing itself off, China is becoming increasingly innovative, and Europe is hopelessly divided. Anyone closing deals in the pharma sector now without a sharp eye for import tariffs, national security, and pricing rules is taking unnecessary risks. Regulatory due diligence offers relief, says Hanneke Later-Nijland, attorney and partner at Genome Lawyers and founder of the global Genotype Network for lawyers specializing in the pharma sector.

Scenario: Suppose you want to buy a pharmaceutical company on behalf of an investment firm. Ten years ago, you would have mainly looked at things like: does this company have good medicines? Are the scientists competent? Are the financial records correct? Today, you must also ask questions like: what does the American president think of this company? Does it have Chinese connections? In how many different countries are the medicines sold, and how does the price differ per country?

Disruption from the US

The uncertainties for dealmakers interested in the biopharmaceutical sector are largely caused by the ideological course change in the United States over recent months, says Hanneke Later-Nijland, attorney and partner at Genome Lawyers. She even speaks of a "perfect storm."

Under President Trump's leadership, multilateral cooperation has taken a back seat and hard-line national interests have taken priority. Attorney Chia Feng Lu (Greenberg Traurig, former McKinsey consultant) exposes the core issue during a meeting of The Genotype Network, a global network of Life Sciences Regulatory attorneys who enjoy working on Life Sciences transactions: "Trump doesn't just want the US to have the upper hand, but also for the US to become self-sufficient." Both, therefore, and not as often thought just a competitive economy: Trump primarily strives for a country that won't be lectured by foreign powers.

This ambition has direct consequences for pharmaceutical value chains worldwide. The US wants to drastically reduce dependence on foreign technology and raw materials. This means bringing back drug production and Active Pharmaceutical Ingredients (APIs) – the active substances that until recently were largely produced in China and India. Sky-high import tariffs of perhaps 100 or even 200 percent are not exceptional and must contribute to this goal. With the side effect that companies outside the US could become much less valuable overnight – if those tariffs actually take effect, which is also not always certain.

Furthermore, foreign acquisitions of American assets are being subjected to increasingly strict national security reviews. All matters that the buyer shopping in the pharmaceutical sector on behalf of an investment firm will have to deal with.

And then there's the notorious Most Favored Nation clause, intended to lower American drug prices by linking them to the lowest prices in comparable countries. This turns the entire international pricing model upside down. Neighboring Canada, where prices are regulated like in Europe – and relatively low-priced – is hit particularly hard. Because now a producer serving the Canadian market with low-priced products suddenly faces having to lower their prices in the US as well.

Attorney Dara Jospé of Fasken describes the panic among her clients: "There are even producers who want to pull their products from the Canadian market because they're afraid they'll be forced to lower their prices." Here too: a development that the buyer in the pharma sector may encounter – and that can cause headaches.

Innovative China

While the US turns inward, China has undergone an unprecedented metamorphosis. The old tripartite division "The US innovates, Europe regulates and China replicates" is hopelessly outdated where Asia is concerned. China has grown into an innovative superpower with a flourishing biotech ecosystem. Feng states bluntly: "Any venture capitalist in Boston can tell you that the Chinese biotech ecosystem is currently the strongest in the world and a threat to the American ecosystem."

The numbers speak volumes: a third of the molecules that large pharmaceutical companies purchased or in-licensed in 2024 came from Chinese biotech companies. In the first half of 2025, forty percent of licensing deals came from China. Production in the country is not only cheap, China also has a large population open to clinical trials and an innovation-friendly registration system. "The innovative capacity of Western companies lags behind that of the Chinese," Later-Nijland notes.

This rise leads to fierce competition that complicates transactions. The American Biosecure Act, which prohibits the US government from contracting with certain Chinese biotech firms, is for example a US response to China's rise. At the same time, many American companies want to continue importing or licensing innovative Chinese technologies and products.

Divided Europe

And where does Europe stand in this geopolitical chess game? The picture is twofold. On one hand, Europe is the second largest and most stable pharma market in the world after the US. On the other hand, it's extremely fragmented: 27 different pricing regimes, 27 separate negotiation systems. A drug can cost 19 euros in Denmark and 383 euros in the United Kingdom. This inevitably leads to parallel trade and drug shortages in countries with lower prices.

During the corona crisis, it briefly seemed that countries and companies within Europe could cooperate well. Countries ordered vaccines together, which in theory strengthened their negotiating position. But because each country imposed different requirements and had different budgets, it became a chaotic process. The vaccine arrived, but the price was higher than necessary.

The lesson: European cooperation can work, but only if countries set aside their self-interest. That was already difficult during the corona crisis, and now even more so. Each country wants to protect its own hospitals, support its own pharmaceutical companies, determine its own prices. Even within the Netherlands – incidentally a middling performer in terms of drug prices – it proves difficult to have different hospitals act as one purchasing party. Later-Nijland therefore advocates for a change in mentality: "In my view, the Dutch and European governments don't think business-minded enough. There needs to be a clearer vision for this sector and more decisiveness."

Regulatory due diligence essential

In this complex landscape, one thing has become crystal clear: it's definitely not "business as usual" anymore. For deal financiers and other M&A specialists, this means they must deploy different instruments than before if they want to limit their risks. That's why companies are also increasingly using earn-out arrangements and complex structures to structure deals, says Grant Strachan, partner at British law firm Brodies.

But perhaps the most important instrument to limit risks is "regulatory due diligence": an in-depth analysis of all laws and regulations applicable to a deal, from price regulation to import restrictions that can make or break a supply chain, from national security rules to cross-border licensing restrictions. Later-Nijland also mentions the status of orphan drugs (medicines for rare diseases), regulatory competitive status, and reimbursement status.

Such a thorough analysis can yield enormous returns, says Later-Nijland. "In 2024, we worked with attorneys from The Genotype Network on a major transaction and were able to reduce the price by millions of euros for the buyer."

Viewed this way, regulatory due diligence is not a compliance exercise but a strategic instrument. And specialized knowledge of regulations is essential for every deal in a sector where geopolitical forces are bearing down.