Fears of price controls and tariffs have caused Big Pharma to lose favor with investors, but this week may have been a turning point with a large Pfizer Trump deal.
Albert Bourla, the CEO of Pfizer, joined President Trump at the White House on Tuesday to introduce “TrumpRx,” a government website that enables Americans to purchase specific medications at reduced cash costs. According to Pfizer, the average price reduction for its products will be 50%, with some instances seeing price reductions of up to 85%. Along with offering Medicaid patients “most-favored-nation” pricing, the company pledged to price all new medications on par with those in other developed markets.
Big Pfizer Trump deal ahead
Many questions still remain. TrumpRx might not be widely helpful because the majority of Americans are already covered by private insurance, Medicare, or Medicaid. Additionally, Pfizer has not yet disclosed its pricing strategy for upcoming medication releases.
After the Pfizer announcement, President Trump stated that he anticipates reaching pricing agreements with additional pharmaceutical companies. The event’s appearance suggested that Trump is keen to reach deals with the pharmaceutical sector. Big Pharma companies should now be able to avoid high tariffs because the majority of them have already committed to significant investments in U.S. manufacturing. That result is further supported by an agreement made with the European Union in late July that capped U.S. tariffs on pharmaceutical exports at 15%. The pricing dispute seems to be coming to an end.
“If this is all that President Trump does on drug pricing, it is likely a win for the pharmaceutical industry and should serve as a clearing event,” said Raymond James analyst Chris Meekins in a note.
Optimism amidst concerns
The NYSE Arca Pharmaceutical Index rallied on Tuesday and Wednesday, reflecting investors’ optimism that the political cloud may finally be lifting. Over the course of the two sessions, Pfizer’s stock increased by over 10%.
Despite those gains, the Arca Pharmaceutical Index has decreased by roughly 5% over the last 12 months, while the S&P 500 has increased by 18%. At roughly 14 times forward earnings as opposed to the S&P 500’s 23, the index is trading at one of its largest historical discounts. This disparity partially reflects the rise in technology stocks due to AI, but politics has also caused investors to turn away from pharmaceuticals.
The arrangement recalls the early 1990s, when concerns about “Hillarycare,” the Clinton administration’s proposed healthcare reform, severely impacted drug stocks. The group experienced a dramatic recovery after the plan failed in late 1994.
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