Shares of biopharma companies rose after President Donald Trump signed an executive order to lower U.S. prescription drug prices to their levels in other countries, though many details of implementing the “most favored nation” (MFN) pricing policy remain unclear—and one industry group criticized the approach as “deeply flawed” and hurtful to smaller drug developers.
Trump declared in a social media post that the cut would deliver savings of “59%, PLUS!” without immediately specifying how the policy would ultimately be carried out once prices are set.
Under Trump’s order, Health and Human Services (HHS) Secretary Robert F. Kennedy Jr. was directed to set “target” prices for drugs within the next 30 days, along with Trump’s Assistant to the President for Domestic Policy, Vince Haley and Centers for Medicare & Medicaid Services Administrator, Mehmet Oz, MD.
Over the next 180 days from today, Kennedy and biopharmas are directed to negotiate prices for drugs individually.
At the end of the 180 days, Kennedy has authority under Trump’s order to “propose a rulemaking plan to impose MFN pricing” if no “significant” progress in negotiation has been made including via Section 804(j), which authorizes importing drug from Canada (and potentially other countries) to lower drug prices for Americans.
“In any case, we think implementation will remain contentious and challenging w[ith] litigation, etc.,” cautioned Michael J. Yee, Jefferies equity analyst, and five associate colleagues in a research note.
Yee observed that implementation of rules for MFN remained vague but could be carried out via an executive order similar to one that Trump issued during his first term, which applied lower drug prices to Medicare Part B and biologic drugs. That order was blocked by a federal court and was set aside by the administration of Trump’s successor and predecessor, Joe Biden.
MFN rules could also emerge via Congressional action, though some news outlets reported that the White House sought to include MFN in the budget reconciliation bill being hammered out by Congress, only to lack support from Republicans who hold the majority in the House of Representatives.
“This is key as it’s unclear to us if negotiations fail after 180 days, whether the president and RFK have the power to implement MFN pricing without Congressional approval and ultimately legislation,” Yee said.
Trump’s administration could join with CMS to launch a pilot program that tests proposals through the Centers for Medicare and Medicaid Services’ Innovation Center (CMMI), which develops and tests health care payment and service delivery models intended to improve patient care, lower costs, and align payment systems. This would allow CMS authority under the President Barack Obama-enacted Affordable Care Act (ACA) to test alternative payment models to Medicare & Medicaid without new legislation, making implementation faster.
Another option, Yee continued, is via negotiations with companies under the Biden-enacted Inflation Reduction Act.
“CMS could revise how it negotiates drug prices to factor in international pricing, but this wouldn’t go into effect until 2028,” under the IRA, Yee wrote, noting that a negotiated drug price takes two years until implementation; drugs negotiated in 2026 would see pricing implemented in 2028.
“We will bring fairness to America. Drug prices will come down,” Trump said in announcing the MFN policy, adding that Americans spent 70% more on prescription drugs now than in 2000.
In an earlier Sunday evening social media post, Trump wrote: “Prescription Drug and Pharmaceutical prices will be REDUCED, almost immediately, by 30% to 80%.”
“The United States will pay the same price as the Nation that pays the lowest price anywhere in the World. Our Country will finally be treated fairly, and our citizens’ Healthcare Costs will be reduced by numbers never even thought of before,” Trump added.
Reasoning that the MFN policy announced today was better than feared, shares of U.S. biopharma giants generally rose by single digits, after dropping by single digits before today’s opening bell. Another key factor in the rally was Trump’s announcement that the U.S. and China had agreed to a 90-day rollback of tariffs on each other’s products while the countries negotiate a formal agreement. By May 14, U.S. tariffs of 145% would plummet to 30% while China’s 125% tariffs on U.S. products would plunge to 10%.
“While the spect[er] of uncertainty still looms, a lot of investors aren’t going to take the administration more seriously on MFN unless there’s a real sign of congressional support or a clear plan on implementation,” another Jefferies equity analyst, Akash Tewari, wrote in a research note.
Among the top four pharmas and biotechs based on market capitalization (the product of the share price and the number of outstanding shares) and the top six ETFs (based on total assets according to VettaFi):
Among U.S. biotech giants:
Shares of the four largest biopharmas based outside the U.S. were all but flat, fluctuating less than 1% in morning trading. At the close today, Novo Nordisk (Nasdaq Copenhagen: NOVOB) dipped 0.65% to DKK 441.40 ($65.64); Roche (SIX Swiss: ROG) inched up 1.67% to CHF 261.90 ($310.13); Novartis (SIX Swiss: NOVN) rose 0.85% to CHF 91.68 ($108.57); and AstraZeneca (London: AZN) gained 0.31% to 10,272 pence or £102.72 ($135.36).
The largest biotech ETF with $5.118 billion in total assets, iShares Biotechnology ETF (NASDAQ: IBB) rose 4.65% to $122.05, while second-largest ETF, SPDR S&P Biotech ETF (NYSE Arca: XBI), increased 4.01% to $79.45, and third-largest ETF, First Trust NYSE Arca Biotechnology Index Fund (NYSE Arca: FBT) grew 4.28% to $159.32.
Among the next three ETFs, the fourth-largest ARK Genomic Revolution ETF (CBOE: ARKG) climbed 4.45% to $22.07; the fifth-largest Direxion Daily S&P Biotech Bull 3X Shares (NYSE Arca: LABU) showed the biggest increase, jumping 12.19% to $51.90; and the sixth-largest VanEck Pharmaceutical ETF (NASDAQ: PPH), which consists of the shares of 25 pharma giants, rose 1.98% to $86.48.
John F. Crowley, president and CEO of the Biotechnology Innovation Organization (BIO), criticized MFN drug pricing as “a deeply flawed proposal that would devastate our nation’s small- and mid-size biotech companies—the very companies that are the leading drivers of medical innovation in the United States and the cornerstone of America’s biotechnology leadership.”
“Importing socialized medicine will not make Americans healthier or our economy stronger. It will only serve to empower China and our other adversaries and undermine our economic and national security. Applying other countries’ antiquated approach to how they value—and pay—for medicines will stall investment across America’s biotech companies, risk access to vital treatments and cures for millions of American patients, and lead to fewer American jobs.”
“Researchers who spend years developing cures and breakthrough treatments are being penalized, and the U.S. is falling behind in the 21st-century biotech race. Meanwhile, U.S. medication prices prop up middlemen that prevent cost savings from being passed on to patients,” Crowley contended.
The solution, Crowley and BIO said, is “investments that ensure the U.S. continues to lead the world in medical innovation, and policies that simplify the system.”
But the Independent Medical Alliance (IMA), a patient wellness and disease prevention group that, along with its advocacy arm, mobilized support for Robert F. Kennedy Jr.’s confirmation as Health and Human Services Secretary, defended MFN drug pricing as beneficial to Americans.
“Pharmaceutical companies rely on taxpayer-funded NIH research to develop life-saving drugs, yet Americans often end up paying far higher prices for these drugs than consumers abroad. President Trump’s MFN policy restores fair market pricing and ensures Americans don’t pay more than other nations,” the IMA asserted in a statement. “This executive order keeps the drug companies honest while preserving the incentives that fuel medical innovation.”
The post Biopharma Stocks Rise as Trump Orders Drug Price Cuts appeared first on GEN - Genetic Engineering and Biotechnology News.
Trump declared in a social media post that the cut would deliver savings of “59%, PLUS!” without immediately specifying how the policy would ultimately be carried out once prices are set.
Under Trump’s order, Health and Human Services (HHS) Secretary Robert F. Kennedy Jr. was directed to set “target” prices for drugs within the next 30 days, along with Trump’s Assistant to the President for Domestic Policy, Vince Haley and Centers for Medicare & Medicaid Services Administrator, Mehmet Oz, MD.
Over the next 180 days from today, Kennedy and biopharmas are directed to negotiate prices for drugs individually.
At the end of the 180 days, Kennedy has authority under Trump’s order to “propose a rulemaking plan to impose MFN pricing” if no “significant” progress in negotiation has been made including via Section 804(j), which authorizes importing drug from Canada (and potentially other countries) to lower drug prices for Americans.
“Contentious and challenging”
“In any case, we think implementation will remain contentious and challenging w[ith] litigation, etc.,” cautioned Michael J. Yee, Jefferies equity analyst, and five associate colleagues in a research note.
Yee observed that implementation of rules for MFN remained vague but could be carried out via an executive order similar to one that Trump issued during his first term, which applied lower drug prices to Medicare Part B and biologic drugs. That order was blocked by a federal court and was set aside by the administration of Trump’s successor and predecessor, Joe Biden.
MFN rules could also emerge via Congressional action, though some news outlets reported that the White House sought to include MFN in the budget reconciliation bill being hammered out by Congress, only to lack support from Republicans who hold the majority in the House of Representatives.
“This is key as it’s unclear to us if negotiations fail after 180 days, whether the president and RFK have the power to implement MFN pricing without Congressional approval and ultimately legislation,” Yee said.
Trump’s administration could join with CMS to launch a pilot program that tests proposals through the Centers for Medicare and Medicaid Services’ Innovation Center (CMMI), which develops and tests health care payment and service delivery models intended to improve patient care, lower costs, and align payment systems. This would allow CMS authority under the President Barack Obama-enacted Affordable Care Act (ACA) to test alternative payment models to Medicare & Medicaid without new legislation, making implementation faster.
Negotiation option
Another option, Yee continued, is via negotiations with companies under the Biden-enacted Inflation Reduction Act.
“CMS could revise how it negotiates drug prices to factor in international pricing, but this wouldn’t go into effect until 2028,” under the IRA, Yee wrote, noting that a negotiated drug price takes two years until implementation; drugs negotiated in 2026 would see pricing implemented in 2028.
“We will bring fairness to America. Drug prices will come down,” Trump said in announcing the MFN policy, adding that Americans spent 70% more on prescription drugs now than in 2000.
In an earlier Sunday evening social media post, Trump wrote: “Prescription Drug and Pharmaceutical prices will be REDUCED, almost immediately, by 30% to 80%.”
“The United States will pay the same price as the Nation that pays the lowest price anywhere in the World. Our Country will finally be treated fairly, and our citizens’ Healthcare Costs will be reduced by numbers never even thought of before,” Trump added.
Reasoning that the MFN policy announced today was better than feared, shares of U.S. biopharma giants generally rose by single digits, after dropping by single digits before today’s opening bell. Another key factor in the rally was Trump’s announcement that the U.S. and China had agreed to a 90-day rollback of tariffs on each other’s products while the countries negotiate a formal agreement. By May 14, U.S. tariffs of 145% would plummet to 30% while China’s 125% tariffs on U.S. products would plunge to 10%.
Seeking congressional sign
“While the spect[er] of uncertainty still looms, a lot of investors aren’t going to take the administration more seriously on MFN unless there’s a real sign of congressional support or a clear plan on implementation,” another Jefferies equity analyst, Akash Tewari, wrote in a research note.
Among the top four pharmas and biotechs based on market capitalization (the product of the share price and the number of outstanding shares) and the top six ETFs (based on total assets according to VettaFi):
- Johnson & Johnson (NYSE: JNJ): All but flat with an 0.05% dip, to $154.14
- Eli Lilly (NYSE: LLY): Up 2.86% to $755.57
- AbbVie (NASDAQ: ABBV): Up 2.96% to $190.07
- Pfizer (NYSE: PFE): Up 3.64% to $23.09
Among U.S. biotech giants:
- Thermo Fisher Scientific (NYSE: TMO): Up 7.31% to $432.59
- Amgen (NASDAQ: AMGN): Up 3.35% to $274.76
- Gilead Sciences (NASDAQ: GILD): Up 7.13% to $103.82
- Vertex Pharmaceuticals (NASDAQ: VRTX): Up 2.33% to $434.89
Shares of the four largest biopharmas based outside the U.S. were all but flat, fluctuating less than 1% in morning trading. At the close today, Novo Nordisk (Nasdaq Copenhagen: NOVOB) dipped 0.65% to DKK 441.40 ($65.64); Roche (SIX Swiss: ROG) inched up 1.67% to CHF 261.90 ($310.13); Novartis (SIX Swiss: NOVN) rose 0.85% to CHF 91.68 ($108.57); and AstraZeneca (London: AZN) gained 0.31% to 10,272 pence or £102.72 ($135.36).
The largest biotech ETF with $5.118 billion in total assets, iShares Biotechnology ETF (NASDAQ: IBB) rose 4.65% to $122.05, while second-largest ETF, SPDR S&P Biotech ETF (NYSE Arca: XBI), increased 4.01% to $79.45, and third-largest ETF, First Trust NYSE Arca Biotechnology Index Fund (NYSE Arca: FBT) grew 4.28% to $159.32.
Among the next three ETFs, the fourth-largest ARK Genomic Revolution ETF (CBOE: ARKG) climbed 4.45% to $22.07; the fifth-largest Direxion Daily S&P Biotech Bull 3X Shares (NYSE Arca: LABU) showed the biggest increase, jumping 12.19% to $51.90; and the sixth-largest VanEck Pharmaceutical ETF (NASDAQ: PPH), which consists of the shares of 25 pharma giants, rose 1.98% to $86.48.
BIO: MFN “deeply flawed”
John F. Crowley, president and CEO of the Biotechnology Innovation Organization (BIO), criticized MFN drug pricing as “a deeply flawed proposal that would devastate our nation’s small- and mid-size biotech companies—the very companies that are the leading drivers of medical innovation in the United States and the cornerstone of America’s biotechnology leadership.”
“Importing socialized medicine will not make Americans healthier or our economy stronger. It will only serve to empower China and our other adversaries and undermine our economic and national security. Applying other countries’ antiquated approach to how they value—and pay—for medicines will stall investment across America’s biotech companies, risk access to vital treatments and cures for millions of American patients, and lead to fewer American jobs.”
“Researchers who spend years developing cures and breakthrough treatments are being penalized, and the U.S. is falling behind in the 21st-century biotech race. Meanwhile, U.S. medication prices prop up middlemen that prevent cost savings from being passed on to patients,” Crowley contended.
The solution, Crowley and BIO said, is “investments that ensure the U.S. continues to lead the world in medical innovation, and policies that simplify the system.”
But the Independent Medical Alliance (IMA), a patient wellness and disease prevention group that, along with its advocacy arm, mobilized support for Robert F. Kennedy Jr.’s confirmation as Health and Human Services Secretary, defended MFN drug pricing as beneficial to Americans.
“Pharmaceutical companies rely on taxpayer-funded NIH research to develop life-saving drugs, yet Americans often end up paying far higher prices for these drugs than consumers abroad. President Trump’s MFN policy restores fair market pricing and ensures Americans don’t pay more than other nations,” the IMA asserted in a statement. “This executive order keeps the drug companies honest while preserving the incentives that fuel medical innovation.”
The post Biopharma Stocks Rise as Trump Orders Drug Price Cuts appeared first on GEN - Genetic Engineering and Biotechnology News.