U.S. President Donald Trump signed an executive order today aimed at lowering drug prices by aligning them with the prices paid by other countries. Trump had previously announced his intention to address the pharmaceutical market situation in the U.S. However, the reaction of drug manufacturers' stocks indicates that the proposed solution is better than what the market had anticipated.
The key element of the new executive order is the introduction of drug pricing based on the principle of the "Most Favored Nation" (MFN) Pricing. Comparing drug prices in the U.S. with those in other developed countries reveals significant discrepancies, and the new regulation aims to eliminate these differences. According to the order, within the next 30 days, the Secretary of Health will contact drug manufacturers and present price targets in line with the MFN policy. During his previous term, Trump had already attempted to implement a similar solution, so the MFN policy is not entirely new.
If companies do not make "significant progress" toward these goals within six months of the order being signed, further measures will be taken to lower prices.
However, the executive order does not specify which drugs will be covered, and its tone is less aggressive than what investors had anticipated. As a result, we are seeing gains in stocks like Eli Lilly (+3.7%), Bristol Myers Squibb (+4%), and Pfizer (+3.4%) during today’s session.
It is worth noting that the issue of resolving drug pricing remains uncertain for now, and considering Trump's previous actions, investors can still expect some twists in this matter.
Eli Lilly breaks a clear downward trend today, led by investors' concerns about Trump's announced changes in U.S. drug pricing. A rebound from the support zone around $761 may indicate a potential recovery for the stocks that saw significant declines last week. Source: xStation
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