Trump's Great Healthcare Plan: A Structural Shift for PBMs and Drugmakers?

The Great Healthcare Plan's most consequential elements are not its broad promises, but specific mechanisms designed to directly reprice drugs and rewire payment flows. These provisions target the pharmaceutical and insurance supply chains at their core, aiming for a structural shift rather than incremental change.

The centerpiece is the codification of the Most-Favored-Nation (MFN) drug pricing deals. The plan calls for Congress to make permanent the recent agreements where drugmakers set U.S. prices at the level of the lowest price paid in other countries, typically for Medicaid building on President Trump's historic actions. This is a direct assault on drugmakers' revenue streams, forcing a fundamental re-pricing of their products to align with international benchmarks. The goal is to extract immediate price concessions, leveraging the U.S. market's size to secure lower costs for all Americans.

Simultaneously, the plan proposes a radical alteration to the insurance subsidy model. Instead of routing the value of the now-lapsed ACA enhanced subsidies through insurers to lower premiums, the plan would send the funds directly to consumers, deposited into a health savings account (HSA) in the individual's name. This move seeks to disrupt the traditional insurer-subscriber relationship, increasing consumer price sensitivity and potentially shifting bargaining power. However, it also introduces complexity, as HSAs typically cannot be used for premiums, creating a practical hurdle for the plan's implementation.

Finally, the plan mandates increased transparency by requiring insurers to publish their claim costs, overhead, and profits requiring them to publish their claim costs, overheads and profits. While this aims to hold companies accountable and inform consumers, it does not alter the fundamental risk-pooling model of insurance. The real structural impact lies in the first two provisions, which directly attack the pricing mechanisms of the drug and insurance markets.

The PBM "Kickback" Crackdown and Its Financial Implications

The plan's assault on pharmacy benefit managers (PBMs) targets the very mechanisms that have fueled their profitability for years. Its focus on "kickbacks" directly aligns with a 2020 regulatory shift that excluded Medicare Part D rebates from safe harbor protection, a move that could significantly reduce PBM revenue streams. The core of the PBM business model has long relied on collecting rebates from drugmakers and using them to negotiate lower prices, with the PBM capturing a portion as administrative fees. By codifying this regulatory change, the plan aims to sever that link, forcing a fundamental re-pricing of the PBM's role in the supply chain.

This regulatory pressure is compounded by a push to extend point-of-sale (POS) discounts. The 2019 HHS rule, which encouraged manufacturers to offer discounts directly at the pharmacy counter, is a key precedent. The plan's continuation of this trend would compress PBM margins by shifting discounting closer to the transaction. In practice, this means the PBM's ability to act as an intermediary for large, negotiated rebates diminishes. Instead, the discount is applied immediately, reducing the PBM's control over cash flows and its leverage in negotiations. The financial implication is clear: a model built on rebate arbitrage becomes less viable.

The combined effect of these provisions is likely to force PBMs into a painful transition. They will need to pivot from a rebate-driven, fee-for-service model toward a more transparent, administrative fee structure. This shift would fundamentally alter their business economics, likely leading to lower overall profitability unless they can scale their fee-based operations dramatically. For investors, the takeaway is structural risk. The PBM sector faces a period of significant financial recalibration, where the old playbook of capturing value from rebates is being systematically dismantled. The plan doesn't just target kickbacks; it aims to re-engineer the entire PBM value proposition.

Financial Impact and Valuation Scenarios

The plan's mechanics translate into concrete fiscal and sectoral impacts, creating a clear divergence between cost-reduction goals and fiscal reality. The most direct financial signal is the projected deficit reduction from the MFN drug pricing deals. According to the White House, these provisions alone could reduce primary deficits by about $50 billion over a decade. This quantifies the plan's core cost-saving ambition, aiming to extract billions from the pharmaceutical sector by aligning U.S. prices with international benchmarks.

Yet this saving is counterbalanced by a significant fiscal offset. The plan's redesign of ACA subsidies-sending funds directly to consumers instead of insurers-could increase primary deficits by up to $350 billion, depending on the final design. This creates a net fiscal impact that is far less positive than the headline drug savings suggest. The subsidy overhaul effectively shifts a massive transfer from the federal government to individuals, likely increasing borrowing to fund the new health savings accounts. For the plan's overall cost-saving potential, this borrowing cost is a critical constraint.

These fiscal dynamics create distinct valuation risks across sectors. Drugmakers with high exposure to international price comparisons face the highest near-term risk. The MFN provisions directly attack their revenue model, forcing a re-pricing of their products to align with lower global levels. This structural pressure could lead to downward revisions in earnings forecasts and a repricing of their stock valuations, particularly for companies reliant on blockbuster drugs.

Similarly, PBMs with large, rebate-dependent revenue streams are under severe pressure. The plan's codification of the 2020 regulatory shift that excludes Medicare Part D rebates from safe harbor protection, combined with a push for point-of-sale discounts, dismantles a core profit center. This forces a painful transition from a rebate-driven model to a fee-based one, likely compressing margins and threatening profitability. The financial implications are clear: the plan's success in lowering costs for consumers may come at the expense of corporate earnings and balance sheets in key parts of the healthcare supply chain.

Catalysts, Risks, and What to Watch

The forward path for the Great Healthcare Plan is now defined by a single, critical variable: congressional action. The plan's success hinges entirely on its passage, a process that faces significant legislative hurdles. As the White House itself acknowledges, many of its moves require action from Congress to extend lower international drug prices to all Americans. The framework is notably vague on implementation details, providing "few specific details as to how they will be achieved" . This lack of specificity creates a window for negotiation and delay, where the final design of key provisions will be shaped by political compromise. The primary catalyst is therefore not the announcement, but the subsequent legislative battle and the release of detailed rules.

A key risk is the potential for unintended consequences that could undermine the plan's cost-saving goals. The most immediate concern is the impact on innovation. By forcing drugmakers to align U.S. prices with the lowest international levels, the plan may reduce the financial incentives for developing new therapies. This could have long-term implications for the pipeline of new medicines, a vulnerability that drugmakers and their investors will closely monitor. Another risk is supply chain disruption. Sudden, mandated price compression could strain relationships between manufacturers, PBMs, and pharmacies, potentially leading to shortages or reduced access to certain drugs during the transition. The plan's ambition to extract billions in savings must be weighed against these systemic risks.

For investors, the critical watchpoints are the design details of the subsidy mechanism and the final rules implementing the MFN and PBM crackdowns. The direct subsidy plan, which would deposit funds into health savings accounts, faces a practical hurdle: HSAs typically cannot be used for premiums . The final rules will reveal whether the administration will make changes to enable this, or if the plan will be diluted to avoid a costly, immediate fiscal offset. More broadly, the implementation of the MFN and PBM provisions will determine the pace and severity of the sectoral recalibration. Any delay or watering down of these rules would signal a retreat from the plan's most aggressive cost-control measures, preserving corporate profits but likely increasing the overall fiscal burden. The coming weeks will be defined by the first concrete steps toward legislation, where the plan's bold promises meet the realities of governance.