Trump's Impact on Drug Pricing: Where to Invest in Healthcare Stocks

The US drug pricing system is relatively straightforward, with pharma companies setting list prices and offering rebates to programs like Medicare and Medicaid. Despite President Trump's threats to cut drug prices, shares of healthcare firms have barely budged. Certain healthcare companies can still do well under the Trump administration, and investing in these companies could lead to gains.

The US drug pricing system, characterized by pharma companies setting list prices and offering rebates to programs like Medicare and Medicaid, has seen significant attention due to President Trump's threats to lower drug prices. Despite these threats, shares of healthcare firms have shown minimal movement, indicating a level of resilience in the sector. This article explores the implications of Trump's drug pricing policies and the potential opportunities for investors.

Pharma's Direct-to-Consumer Strategy

Pharma companies are expanding their direct-to-consumer sales model, a strategy supported by President Trump. Companies like Eli Lilly and Novo Nordisk have been offering discounted cash prices for their blockbuster treatments, bypassing insurers and pharmacy benefit managers. However, experts suggest that this approach may not significantly lower drug prices for consumers. The cash prices offered by pharma companies, currently several hundred dollars per month, are unlikely to be as low as those available through insurance. Moreover, direct purchases do not contribute to patients' deductibles or out-of-pocket maximums, potentially limiting their long-term cost benefits [1].

Medicare Drug Price Negotiations

The Trump administration is using a program created by Democrats to negotiate lower drug prices in Medicare. This initiative, part of the Inflation Reduction Act, aims to reduce costs for Medicare beneficiaries. Wall Street analysts and Washington insiders predict that the Centers for Medicare and Medicaid Services (CMS) will press for lower prices from pharmaceutical companies. The negotiation program could lead to significant reductions in drug prices, potentially impacting the financial performance of pharma companies [3].

Pharmaceutical Tariffs

The Trump administration has implemented a 15% tariff on drug imports from Europe, a move that has had mixed reactions in the industry. While the tariff is lighter than initially promised, it still poses a challenge to pharmaceutical stocks. The tariffs are expected to apply to the US customs landing values, including intellectual property costs embedded in imported prescription drugs. The tariffs could increase the cost of drugs for consumers and potentially impact the profitability of pharmaceutical companies [4].

Impact on Healthcare Companies

Despite the potential challenges posed by Trump's drug pricing policies, certain healthcare companies may still perform well. Investors should focus on companies that have strong financials, robust research and development pipelines, and diversified product portfolios. These companies are better positioned to navigate the regulatory environment and adapt to changes in drug pricing policies.

Conclusion

The US drug pricing system is complex, and President Trump's threats to lower drug prices have had mixed effects on healthcare stocks. While the direct-to-consumer sales model and Medicare drug price negotiations could lead to lower prices for consumers, they may also increase costs for pharmaceutical companies. Investors should carefully evaluate the potential impacts of these policies on individual companies and consider the broader trends in the healthcare sector. The resilience of healthcare stocks suggests that the sector is well-positioned to adapt to regulatory changes and continue delivering value to investors.

References
[1] Molly Ferguson for STAT. (2025, August 19). With Trump’s backing, the pharma industry is expanding the model, but experts expect its impact to be limited. Retrieved from https://www.statnews.com/2025/08/19/direct-to-consumer-drug-costs-pharma-analysis/
[2] Elevance Health’s lawsuit against the Centers for Medicare and Medicaid Services over its Medicare Advantage star ratings scores has been shot down by a judge in the Northern District of Texas. Retrieved from https://www.healthcarefinancenews.com/news/elevance-loses-lawsuit-over-medicare-advantage-star-ratings
[3] Mandel NGAN / AFP. (2025, August 19). Trump may aggressively negotiate lower drug prices in Medicare. Retrieved from https://www.statnews.com/2025/08/19/trump-medicare-drug-price-negotiations-expected-to-exceed-biden/
[4] Pharmaceutical stocks breathed a sigh of relief Friday after the Trump administration agreed to a 15% tariffs on drug imports from Europe. Retrieved from https://www.investors.com/news/technology/pharmaceutical-tariffs-pharmaceutical-stocks/