Pharma Stocks Under Siege: Assessing Financial Resilience Amid U.S. Price Caps

The pharmaceutical sector has faced a reckoning in 2025, with stocks like Roche (-3.6% YTD) and Novo Nordisk (-7.5% YTD) under pressure as investors grapple with the implications of U.S. drug pricing reforms. While headlines warn of an “impending Medicare Part B price cap crisis,” the reality is more nuanced. This analysis dissects which companies are truly vulnerable—and where contrarian opportunities lie.

The Regulatory Reality Check: No Broad Caps—Yet

The U.S. Medicare Part B price cap narrative has been exaggerated. As of May 2025, no sweeping price controls exist for most Part B drugs. The sole exception is an insulin cap ($35/month for pump users), part of 2022’s Inflation Reduction Act. Broader reforms, including drug price negotiations for Part B, are deferred until 2028. Meanwhile, the focus in 2025 has shifted to Medicare Part D, where a $2,000 annual out-of-pocket limit now applies.

This delay creates a critical window. While investors have priced in worst-case scenarios, the sector’s immediate exposure is overstated. The real threat lies in 2028, when Part B negotiations—targeting high-cost, single-source drugs—will begin. Companies reliant on U.S. Part B revenues (e.g., Merck’s Keytruda, Regeneron’s Eylea) face longer-term headwinds, but their stocks may now offer buying opportunities if their global footprints and pipelines offset domestic risks.

Sector-Specific Vulnerability: The Part B Exposure Matrix

To assess resilience, focus on two metrics:
1. Part B Revenue Dependency: Companies deriving >30% of U.S. sales from Part B drugs face greater 2028 exposure.
2. Pricing Disparities: U.S. list prices for Part B drugs often exceed global benchmarks by 200-300%. This creates a “safety cushion” if companies can rebalance pricing post-2028.

At-Risk Candidates:

• Novo Nordisk: While its insulin cap exposure is mitigated by the $35/month carve-out, its broader diabetes portfolio (e.g., Ozempix) faces scrutiny. The stock’s 7.5% YTD decline reflects investor anxiety over future negotiations.
• Roche: High-margin Part B drugs like Avastin and Herceptin (cancer therapies) account for ~25% of U.S. sales. Global revenue streams (e.g., European/Emerging Markets) soften the blow, but the stock’s dip suggests overreaction to delayed reforms.

Resilient Plays:

• Merck: Despite Keytruda’s ~30% U.S. Part B sales exposure, its diversified portfolio (e.g., molnupiravir, Gardasil) and $18 billion pipeline provide a buffer.
• Bayer/Regeneron: Eylea’s Part B dominance (macular degeneration) is offset by global sales (60% of Eylea revenue outside the U.S.) and new indications (diabetic retinopathy).

The Diversification Edge: Global Markets and R&D Pipelines

The U.S. represents only 40% of global pharmaceutical revenue. Companies with geographic diversification (e.g., China, EU) and strong pipelines can weather Part B headwinds:
- China’s Growth: Biologics approvals in China have surged, with 2025 sales up 15% YoY. Firms like Pfizer and AstraZeneca are capitalizing here.
- Emerging Markets: Novartis and Sanofi have expanded access programs in Africa and Southeast Asia, shielding them from U.S. pricing pressures.

Contrarian Bets vs. Defensive Exits

Buy Now:
- Merck: Its stock’s 5% YTD drop underestimates its global reach and pipeline depth. Keytruda’s 2028 risk is partially priced in.
- Bayer: Eylea’s diversification and Bayer’s agricultural division (a cash cow) justify a 6% YTD dip.

Sell or Avoid:
- Novo Nordisk: While Ozempix’s success is undeniable, its reliance on U.S. insulin sales and litigation risks around pricing models make it a “wait-and-see” play.
- Roche: A 3.6% decline may not be enough to offset Part B exposure; consider hedging with puts.

Final Call: Time is on Your Side

The 2028 timeline creates a 3-year runway to assess how companies adapt. For now, the market’s panic over delayed reforms offers a buying opportunity for names with global scale and innovation. Investors should prioritize firms with non-U.S. revenue anchors and diversified pipelines, while avoiding those overly dependent on U.S. Part B pricing. The pharma sector’s best days aren’t behind it—just its pricing model.

Act now: The window to position for 2028’s reckoning is open—and narrowing.