Pfizer Stock Soars on Trump’s New Drug Pricing Plan. Here’s Why.

President Donald Trump has pressured pharmaceutical companies over the prices they charge in the U.S. (CHIP SOMODEVILLA/Getty Images)

Key Points

• Pfizer will cut drug prices for Medicaid and launch new U.S. drugs at prices matching other wealthy nations.
• Pfizer will sell all medicines below current U.S. list prices to cash-paying consumers through a federal website.
• Pfizer shares rose 4.6% after the agreement, which includes a three-year tariff exemption and $70 billion U.S. investment.

Drugmaker stocks were having their best day in months on Tuesday, after Pfizer appeared to defang the Trump administration’s efforts to cut drug prices and impose big tariffs on pharmaceutical imports.

At a White House press conference, President Donald Trump said that Pfizer will reduce prices for drugs sold into the Medicaid system, and will launch new drugs in the U.S. at lower prices that match those in other wealthy nations.

The president also said that Pfizer will sell all its medicines at lower prices to cash-paying consumers through a federal government website.

The agreement with Pfizer looks like a best-case outcome for the industry. While the executive order that President Donald Trump signed in May appeared to demand that drugmakers cut prices for all drugs sold in the U.S., Pfizer has extracted what seems to be a far better arrangement that will have a manageable effect on the company’s business.

What’s more, Pfizer CEO Albert Bourla said at a White House press conference that Trump had agreed to a “three years grace period” to exempt Pfizer from the long-threatened sector-specific tariffs on pharmaceutical imports.

Bourla said that the company had committed to moving production of U.S. drugs into the country, and will commit an additional $70 billion to capital projects and research and development in the U.S.

That lifts two major overhangs that have been pressuring shares of Pfizer, and the rest of the Big Pharma names, since the start of the year. Pfizer shares were up 6.8%, and the stock was headed for its largest percent increase since May of 2024. Merck shares were up 6.7% on the stock’s best day since 2021.

Other pharmaceutical stocks were up sharply as well, including Eli Lilly , up 5.2%, and Bristol Myers Squibb , up 2.2%.

At the midday press conference, where he stood flanked by Bourla and health secretary Robert F. Kennedy Jr., Trump said that other drugmakers will make similar commitments.

“They’re all coming in over the next week,” Trump said. “We’re making deals with all of them.”

The Pfizer deal appears to set up a template for the industry to manage the White House’s insistence that drugmakers drop their U.S. prices to the same levels charged in other wealthy countries, and minimize the lingering threat of punishing drug tariffs.

The commitments from Pfizer come a day after a deadline that Trump had set for drugmakers to make concessions on pricing. In letters sent to the top executives of major U.S. and European drugmakers in late July, the president demanded they agree to measures to cut U.S. drug prices.

Pfizer agreed to those measures on Tuesday, and administration officials presented the deal as a major win at the midday press conference. But the details of the agreement add up to a very manageable hit for Pfizer.

Pfizer committed to selling virtually all of the drugs it currently has on the market to Medicaid plans at most favored nation prices. But Medicaid plans already pay lower prices than other payers for prescription drugs, and it is unclear how much lower a most favored nation price would actually be.

In a note to investors on Tuesday, Leerink Partners analyst David Risinger called the agreement to adopt most favored nation prices for Medicaid “immaterial” for Pfizer.

For the rest of the U.S. drug buyers, Pfizer only committed to selling newly launched drugs at most favored nation prices. Pfizer will be able to manage the most favored nation price by setting higher prices overseas, which leaves questions about how significant a reduction in U.S. prices the deal will achieve for payers.

As for the direct-to-consumer platform, drugmakers have rushed to embrace direct-to-consumer models as a way to lower sticker prices while preserving revenue. Direct-to-consumer sales skip intermediaries like the pharmacy-benefit managers, to which the drugmakers must pay rebates, allowing the drugmakers to preserve their net prices.

The White House said Tuesday that the direct-to-consumer price of Pfizer’s dermatitis treatment Eucrisa will be 80% below the current list price, while its arthritis drug Xeljanz will be priced at a 40% discount.

This likely won’t be helpful to many patients. While direct-to-consumer models have been successful for the new weight loss drugs from Eli Lilly and Novo Nordisk, which many insurers don’t cover, insured patients generally pay a tiny fraction of a drug’s list price at the pharmacy counter. Insurers won’t help cover the cost of a direct-to-consumer drug purchase, which means that most patients would likely be paying far more out of pocket if they choose to buy a drug through a direct-to-consumer portal.

In his Tuesday note, Leerink’s Risinger wrote that he expects prices for the direct-to-consumer platform will be “roughly in line (and not below)” current U.S. net prices. In other words, though list prices will drop, the revenue to Pfizer from direct-to-consumer sales will be no lower.

All togethe r, Pfizer and its peers seem to have come out far better than expected from the Trump administration’s pricing and tariff gambits. The question is whether the administration’s efforts end there.

“If this is all that President Donald Trump does on drug pricing, it is likely a win for the pharmaceutical industry and should serve as a clearing event,” Raymond James healthcare policy analyst Chris Meekins wrote on Tuesday. “However, has Trump ever been really satisfied with what the pharmaceutical industry has done?”

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com