U.S. President Donald Trump shakes palms with Pfizer CEO Albert Bourla (L) as he declares a deal with Pfizer to decrease Medicaid drug costs within the Oval Office of the White House on September 30, 2025 in Washington, DC.
Win Mcnamee | Getty Images
President Donald Trump‘s long-awaited threat to impose pharmaceutical tariffs might not pose as a lot of a problem as drugmakers once feared, following his new drug pricing deal with Pfizer.
Trump’s Tuesday settlement with the corporate to voluntarily decrease U.S. drug costs included a three-year exemption from pharmaceutical-specific tariffs, so long as the agency additional invests in home manufacturing. Pfizer on Tuesday pledged to place $70 billion into U.S. manufacturing and analysis, on prime of earlier investments.
That deal introduced reduction and readability to Pfizer and the broader pharmaceutical trade, signaling that many drugmakers may strike related agreements that will make them resistant to the levies for many of Trump’s time period.
The Trump administration additionally made it clear that it’s going to attempt to safe these drug pricing agreements earlier than it imposes tariffs. Commerce Secretary Howard Lutnick on Tuesday mentioned he’ll let firms end their negotiations with the administration earlier than setting pharmaceutical-specific levies underneath the authorized authority often known as Section 232.
Trump on Tuesday mentioned he is working with different drugmakers to safe related pacts over the subsequent week, and the White House confirmed that Eli Lilly is predicted to strike the subsequent drug pricing deal. The overwhelming majority of main pharmaceutical firms, together with Eli Lilly, Johnson & Johnson, AstraZeneca, AbbVie, Roche, Novo Nordisk and Amgen have unveiled new U.S. investments in manufacturing or analysis amenities in latest months to construct goodwill with the president.
Shares of Pfizer and a number of other different drugmakers rose on Tuesday following the settlement. Pfizer’s inventory ended greater than 6% increased, whereas Eli Lilly rose 5%. Shares of AbbVie and AstraZeneca climbed greater than 3%, whereas J&J and Bristol Myers Squibb’s shares elevated greater than 2% every.
The Pfizer deal provides certainty for drugmakers and shifts the president’s insurance policies “potentially away from Pharma tariffs,” BMO Capital Markets analyst Evan Seigerman mentioned in a be aware on Tuesday.
“Today’s deal seems to set a path for other pharmaceutical players to follow, allowing for headline pricing concessions and a Trump ‘win’ without more punitive implementation” of the president’s so-called most-favored-nation coverage or tariffs, Seigerman added.
Trump in May signed an govt order reviving that controversial plan, which goals to tie the costs of some medicines within the U.S. to the considerably decrease ones overseas. As a part of that effort, Trump in July despatched letters to 17 drugmakers — together with Pfizer — calling on them to take steps to decrease drug costs by Sept. 29.
“As we think about the group more broadly, we would not be surprised to see a number of similar agreements to help remove uncertainty on the [most-favored-nation policy and] tariffs,” JPMorgan analyst Chris Schott mentioned in a be aware Tuesday.
‘Most-favored-nation’ danger could also be manageable
Tuesday’s deal appeared to convey different excellent news to some drugmakers.
Pfizer agreed to promote its current medicine to Medicaid sufferers on the lowest worth provided in different developed nations, or what Trump calls the most-favored-nation worth. But Schott mentioned most-favored-nation pricing for Medicaid is “highly manageable” for Pfizer. He mentioned that is partially as a result of Medicaid pricing is already much like worldwide ranges for many medicine.
Notably, Medicaid represents lower than 5% of the corporate’s U.S. gross sales and an “even smaller percentage of global sales,” Leerink Partners analyst David Risinger mentioned in a be aware Tuesday.
The similar goes for most of the giant drugmakers, in line with information compiled by Schott. Medicaid makes up lower than 5% of Bristol Myers Squibb’s U.S. gross sales, lower than 7% of Regeneron’s home income, and round 8% of Lilly’s and AbbVie’s home gross sales.
Medicaid additionally represents round or lower than 10% of U.S. gross sales for all of J&J, Merck, Amgen and Biogen.
Gilead is among the many drugmakers with higher publicity to Medicaid, with this system making up round 20% of its home gross sales. Medicaid performs a big position in HIV prevention and remedy, particularly for underserved populations, which is a core focus for Gilead.
The different a part of Pfizer’s deal includes the corporate guaranteeing the identical most-favored-nation pricing on its new medicine for Medicare, Medicaid and industrial payers. But Schott mentioned he sees a “limited impact” of that provision, as he expects Pfizer and the broader trade to boost their costs for brand spanking new medicine overseas slightly than decrease them within the U.S.
He added that it’s going to seemingly apply to a small variety of remedies every year and is “much more digestible” for the corporate than any broad implementation for merchandise already in the marketplace.