SA Asks: How could Trump’s drug pricing demands impact stocks?

Last week, President Trump sent letters to 17 major pharmaceutical companies advising them to work with his administration to lower drug prices within the next 60 days or face significant penalties.

The letters were sent to the CEOs of AbbVie (NYSE:ABBV), Amgen (NASDAQ:AMGN), AstraZeneca (NASDAQ:AZN), Boehringer Ingelheim, Bristol Myers Squibb (NYSE:BMY), Eli Lilly (NYSE:LLY), EMD Serono, Roche’s (OTCQX:RHHBY) Genentech, Gilead (NASDAQ:GILD), GSK (NYSE:GSK), Johnson & Johnson (NYSE:JNJ), Merck (NYSE:MRK), Novartis (NYSE:NVS), Novo Nordisk (NVO), Pfizer (NYSE:PFE), Regeneron (NASDAQ:REGN), and Sanofi (NASDAQ:SNY).

Trump said if the companies didn’t comply with his request, the U.S. government would “deploy every tool in our arsenal to protect American families from continued abusive drug pricing practices.”

We asked Seeking Alpha analysts Atticus Analysis, Sivanand Birusumanti, BioCGT Investor and Myriam Alvarez for their thoughts on how Trump’s pricing demands could impact drug stocks.

Atticus Analysis: In my view, this is likely to have little impact, just as the original May announcement meant very little. Trump isn’t likely to follow through – TACO – but even if he does, drug pricing is very complex, and drug companies have many levers they can pull to appear to reduce prices while keeping profits high.

For example, they can provide a “discount” while raising list prices, or they can lower prices for some drugs while raising them for others that are used in combination, or they can lower the price only for certain drugs that are about to go generic. In addition, Big Pharma has plenty of support from both parties in Congress, which means it is likely to secure whatever carve-out it needs to preserve profit margins.

Sivanand Birusumanti: President Trump’s 60-day ultimatum to lower drug prices in the U.S. will be a headwind to major pharmaceutical manufacturers. With such companies already battling tariff headwinds and aiming to shift their production capacity domestically, this ultimatum represents an obstacle to these plans. Hence, it will put pressure on pharma companies’ margins and profitability from the U.S. market.

I would take a close look at AstraZeneca (NASDAQ: NASDAQ:AZN) in particular. About a week before Trump announced his ultimatum, AstraZeneca outlined plans to invest $50 billion to expand its U.S.-based drug production capacity. With the U.S. market already being a major revenue source for AstraZeneca, Trump’s pricing demands could lower the company’s top-line growth.

BioCGT Investor: Large pharmaceutical/biotech companies heavily reliant on the U.S. markets are likely to observe a significant drop in their revenue projections, supporting bearish investor sentiment and increased stock volatility in the short term. Contrastingly, mid- to small-cap companies developing or commercializing lower-cost alternatives (generics, biosimilars, etc.) may only experience mild short-term impact.

Over the mid-term, companies could reassess R&D investment, potentially reducing pipelines and focusing on product candidates with lower pricing pressures (e.g. orphan drugs). To offset losses, companies may increase international prices, restructure supply chains, and/or withdraw drugs from selected international markets to protect U.S. profit margins.

Overall, Trump’s pricing demands, combined with tariffs and onshoring pressures, are likely to slow down growth and R&D investment across the pharma/biotech sector and potentially have a negative impact on share price.

Myriam Alvarez: In May, Trump issued his “Most Favored Nation” executive order to lower U.S. drug prices to match those of comparable countries. But note, this order didn’t have an enforcement mechanism. Trump’s July letters encouraged companies to sell directly to consumers, bypassing pharmacy benefit managers, and accused them of inflating drug costs.

Big Pharma responded by providing online drug ordering platforms and exploring direct-to-consumer models. Pfizer (NYSE:PFE), for example, is now using online platforms. But since March, Eli Lilly (NYSE:LLY) has offered insulin directly to patients for $35 per month. So, while the pricing demands initially hit healthcare stocks, it was shortly followed by a recovery. Compliance is also challenging.

Having said that, I believe this new DTC approach could resonate well with consumers. New risks emerge as patients might order items not ideal for them, but in the short term, I think this new touchpoint could actually boost healthcare stocks.