The US president has repeatedly pressured companies to bring their US prices in line with what foreign countries pay
[NEW YORK] Pfizer secured a reprieve from US President Donald Trump’s long-threatened tariffs on the pharmaceutical industry on Tuesday (Sep 30) by agreeing to slash some of its drug prices by up to 85 per cent and selling directly to the American public, a move other major drugmakers are expected to follow.
Pfizer said that it will ensure Americans receive comparable prices to those offered in other countries and will launch new medicines at parity, addressing a key Trump complaint that Americans unfairly shoulder the highest medical costs in the world. In exchange, the company gained a three-year grace period from widely anticipated pharmaceutical tariffs that the administration has been promulgating.
It’s the latest example of the transactional nature of winning tariff exemptions from Trump, who has unilaterally wielded trade policy to exert power over multiple industries. As recently as last week, he threatened 100 per cent tariffs on the pharmaceutical industry.
Similar deals could be forthcoming. Eli Lilly said that it’s in active discussions with the administration to further expand patient access, as the announcement on Tuesday underscores the urgency of making medicines more affordable.
Commerce Secretary Howard Lutnick suggested the administration was holding its national security probe into pharmaceutical imports that could pave the way for new tariffs, as officials engage in talks with major drugmakers.
“While we are negotiating with these companies, we are going to let them play out and finish these negotiations,” Lutnick said.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Threat reduction
The latest deal appears to resolve two major threats facing Pfizer. It averts more damaging pricing policies on medicines, while shielding the company from tariffs tied to the administration’s Section 232 investigation into whether drug costs represent a national security threat.
The deal is a boon for chief executive officer Albert Bourla, who has struggled to replace flagging sales of Covid vaccines and therapies that were in high demand during the pandemic. It also yielded rare praise from US health officials, who previously criticised the CEO and his company.
“Albert and I have had a long history of antipathy and antagonism towards each other,” said Health Secretary Robert F Kennedy Jr, who has repeatedly questioned the safety of Pfizer’s Covid vaccine. “But I have to say his leadership in this took tremendous courage, and he really created a template for corporate responsibility, for putting public health ahead of his individual interests.”
Pfizer shares rose as much as 5.6 per cent after the tariff relief was announced, touching a session high. The stock had declined 10 per cent this year to Monday’s close, trailing the S&P 500 Index’s 13 per cent gain.
The company will offer a large majority of its primary care treatments and some speciality brands at discounts of up to 85 per cent, and at an average of 50 per cent off, on a direct-to-consumer website called TrumpRx. The initiative is intended to allow Americans to pay for prescriptions at discounted rates that are negotiated by the government.
Trump previously said that his administration would impose 100 per cent duties on branded pharmaceuticals starting on Wednesday unless a company was building US manufacturing plants. The latest comments from the president and his advisers indicate that the threat was a negotiating ploy to get companies to lower prices on their products.
“They are all coming in over the next week. We are making deals with all of them. And I said that if we don’t make a deal, then we are going to tariff them an extra 5, 6, 7, 8 per cent. Whatever the difference is, we will take that away,” Trump said.
Guidance unchanged
Wall Street took the announcement as a broad win for drugmakers, with the S&P 500 Pharmaceuticals Index climbing 3.8 per cent. The industry has been girding for tariffs and other penalties since Trump took office.
“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 pricing demands or tariffs, said Evan Seigerman, a BMO Capital Markets analyst.
Still, analysts said that the impact on patients’ pocketbooks and the hit to Pfizer’s bottom line is likely to be meagre. Prices at the pharmacy counter are the result of an opaque system of negotiation and rebates that render drug pricing a black box.
“For all the hype and commentary around delivering a transformative win for lower drug prices, it’s worth noting that Pfizer’s press release didn’t change a single financial metric or piece of guidance,” wrote Cantor analyst Carter Gould. “The immediate stock reaction across the group affirms our view that this is more optics than bite, and the sector is appropriately trading higher on fading MFN concerns.”
Most pharmaceutical companies declined to comment on the Pfizer news or did not return inquiries seeking comment. Merck said that it’s committed to working with the administration and supports rising foreign prices and lowering US prices. Novo Nordisk said that it engaged in discussions with the administration and is focused on improving patient access and affordability.
Medicaid price cuts
Pfizer will offer across-the-board reductions on US prices for Americans enrolled in the Medicaid insurance programme, giving them “most favoured nation” pricing on some of its medicines, Trump said. He has repeatedly pressured companies to bring their US prices in line with what foreign countries pay.
Pfizer also plans a US$70 billion push on research and development and domestic manufacturing over the next few years, Bourla said. The company had been one of the rare exceptions among major drugmakers who rushed to highlight the return of manufacturing facilities to the US amid pressure from Trump.
“We now have the certainty and stability we need on two critical fronts, tariffs and pricing, that have suppressed the industry’s valuations to historic lows,” Bourla said.
Pfizer did not specify which of its medicines would be made available on TrumpRx but said the majority of its primary care drugs would be offered on the site. Pfizer’s top-selling drugs include the blood-thinner Eliquis, the pneumonia vaccine Prevnar, and a shot and pill for Covid-19.
Large corporations and powerful executives have been able to persuade the president to give them more favourable terms by leveraging their personal relationships with him. Last month, Apple secured relief from coming tariffs on imported semiconductors after chief executive officer Tim Cook presented a gold and glass statue to Trump in the Oval Office and vowed to boost the companies’ investments in the US.
“While Democrats are threatening to shut down the government to subsidise health care for illegal aliens, President Trump is leveraging the power of the federal government to drastically cut drug prices for everyday Americans,” White House spokesperson Kush Desai said in a statement. “Democrats talked the talk for decades about drug prices, but only President Trump is actually walking the walk.”
The most-favoured-nation policy demands companies reduce Medicaid prices, increase the costs of their drugs overseas, promise to match foreign prices for future drugs to what they cost in the US and set up discounted direct-to-consumer sales for some widely used medications.
Trump outlined his demands in July with letters to 17 of the world’s largest drugmakers, including Eli Lilly, Novo Nordisk and Pfizer. Those letters gave the companies until Sep 29 to comply, with the president vowing to “deploy every tool in our arsenal” to punish drug makers that did not follow through.
The pharmaceutical industry has protested the idea of globally-linked drug prices as a threat to years of US dominance in biomedical research. Drugmakers warn it will sap the incentive to invent new therapies and prevent patients from getting medicines they need. Executives have urged the administration to instead turn its attention to the middlemen in the pharmaceutical supply chain, who negotiate prices on behalf of employers. BLOOMBERG
