[Image licensed from Adobe Stock]
The executive order describes the current dynamic as one in which the U.S. drives global pharma innovation while foreign health systems get a “free ride.” It concludes that “this abuse of Americans’ generosity, who deserve low-cost pharmaceuticals on the same terms as other developed nations, must end.”
Industry groups responded critically, with PhRMA echoing the nationalistic tone often deployed by the administration itself. “Importing foreign prices from socialist countries would be a bad deal for American patients and workers,” said PhRMA CEO Stephen J. Ubl in a statement. Ubl warned that the policy would translate into fewer “treatments and cures and would jeopardize the hundreds of billions our member companies are planning to invest in America.” He went on to predict that the order would threaten jobs, hurt the U.S. economy and make the U.S. “more reliant on China for innovative medicines.”
Both PhRMA and the National Community Pharmacists Association (NCPA) blamed pharmacy benefit managers (PBMs) for driving up drug prices in their responses to the executive order, contending that any most‑favored‑nation (MFN) price cuts will never reach patients unless PBM spread‑pricing and rebate skimming are reined in first. “The U.S. is the only country in the world that lets PBMs, insurers, and hospitals take 50% of every dollar spent on medicines,” as PhRMA put it. “The amount going to middlemen often exceeds the price in Europe. Giving this money directly to patients will lower their medicine costs and significantly reduce the gap with European prices.” In April, NCPA said it was “optimistic that the administration is making moves to address PBMs,” while cautioning that “the devil will be in the details and the implementation.”
Still, PBMs and their defenders argue that their rebate negotiations help insurers control overall drug spending and keep premiums lower. Some researchers such as Susan A. Cantrell, CEO of the Academy of Managed Care Pharmacy, caution that weakening PBMs’ role in extracting manufacturer discounts could backfire, raising plan costs and shifting the burden elsewhere in the system. Cantrell also argued it was unfair to put the full blame for drug pricing on PBMs. “The tenor of the discussion around PBMs has reached an unconstructive point, with PBMs cast as solely responsible for high prescription prices,” she wrote in late 2024. Casey B. Mulligan, economist at the University of Chicago, found that PBM regulation, if poorly designed, could lead to higher out-of-pocket expenses for patients and increased drug spending while weakening the incentive for pharma companies to innovate.
UBS struck the most upbeat note. In a same‑day flash report, analyst Trung Huynh called the risk‑reward profile “more favorable than expected,” arguing that Trump’s real goals, raising ex‑US prices and clipping PBM margins, could actually lift long‑run cash flows for large‑cap drug makers.
The market is treating the EO as a starting gun for negotiations—not as an immediate earnings event. With a long runway to alter or dilute the proposal, and a plausible scenario in which higher ex‑U.S. prices plus PBM reform buffer headline cuts, investors are marking up cash‑rich innovators such as Pfizer (+3.2 %) and Eli Lilly (+2.7 %) instead of selling first and asking questions later.
Filed Under: Regulatory affairs
