The New Frontier of US Drug Pricing: How Trump's Policies Could Reshape the Pharma Landscape

The Biden era’s approach to drug pricing may be a distant memory as President Donald Trump’s 2025 executive orders aim to slash prescription drug costs to international levels. These sweeping reforms, targeting everything from Medicare negotiations to insulin affordability, promise to upend the pharmaceutical sector. For investors, the question is clear: Which companies will thrive—and which will falter—in this new regulatory environment?

Medicare Negotiation Overhaul: Biologics in the Crosshairs

The cornerstone of Trump’s plan is eliminating the “pill penalty,” a policy that delayed Medicare negotiations for biologics (e.g., expensive monoclonal antibodies) by four years compared to small-molecule drugs. By evening the playing field, the administration aims to reduce reliance on high-cost biologics. This shift could hit biotech firms like Biogen (BIIB) and Regeneron (REGN), whose revenue streams depend on premium-priced therapies.

While these stocks have held up so far, the long-term risk of compressed margins under accelerated price negotiations could pressure valuations. Conversely, small-molecule drugmakers like Pfizer (PFE) or Merck (MRK) might gain an edge, as their therapies could enter negotiations sooner, spurring adoption by Medicare patients.

Price Caps: Insulin Makers Face a Crucial Test

The proposal to cap insulin and epinephrine costs at 340B Program rates—potentially reducing insulin to $0.03 per dose—directly targets manufacturers like Eli Lilly (LLY) and Novo Nordisk (NVO). These firms have long defended their pricing as necessary for R&D, but the administration’s focus on vulnerable populations could erode their pricing power.

Both stocks have dipped in recent years amid similar proposals, suggesting investors already anticipate regulatory headwinds. If implemented, the policy could accelerate this trend, especially if states expand access to low-cost insulin programs.

Importation and Generics: A Boon for Canadian Pharmacies and Teva?

By streamlining drug imports from Canada, Trump’s plan could undercut brand-name drugs, favoring generic manufacturers like Teva Pharmaceutical (TEVA) and Mylan (MYL). Canadian pharmacies (e.g., Shoppers Drug Mart) might also see surging demand as Americans seek cheaper alternatives.

Generics stocks have historically risen when importation pathways expand, and this policy could further narrow the gap between U.S. and global drug prices. However, execution risks remain: the FDA’s ability to ensure safety and supply chain integrity will be critical.

Transparency and Anti-Competitive Measures: PBMs in the Spotlight

Pharmacy benefit managers (PBMs) like CVS Health (CVS) and Express Scripts (ESRX) face heightened scrutiny over opaque fees and “pay-for-delay” deals. While PBMs could lose revenue from reduced markups, their data-driven models might also position them as partners in cost containment.

Investors will watch whether transparency measures force PBMs to lower fees or pivot to value-based contracts. The sector’s adaptability will determine its trajectory.

Conclusion: A Sector Divided

Trump’s reforms present a mixed bag for pharmaceutical investors. Companies exposed to Medicare negotiations (biologics) or high-cost insulin (LLY, NVO) face significant headwinds, while generics (TEVA, MYL) and insurers (ANTM, UNH) may benefit from expanded patient access. The administration’s goal of aligning U.S. prices with global norms—where drugs like insulin cost a fraction of U.S. prices—adds urgency.

Crucial data points include:
- Medicare’s 22% savings target: Exceeding this would validate the policy’s efficacy.
- Hospital acquisition cost surveys: If drug prices drop by 35% as projected, it could force manufacturers to adjust globally.
- State-level importation uptake: A 30% increase in Canadian drug imports could trigger a price war.

Yet risks linger. Legal challenges (e.g., to the revived 2020 “Remedy Rule”) and congressional gridlock could delay implementation. For now, investors should favor diversified players like Pfizer (PFE) and watch closely for regulatory wins—or setbacks—that could redefine the industry’s financial landscape.

In this new era, survival hinges not just on pricing power, but on agility in a world where “international levels” become the new benchmark.