Have you noticed the buzz about drug prices lately? The Trump administration is shaking things up with new policies that could change how much we pay for medications and impact the stock market. At Stonewater Financial, we’re here to break it down for you in simple terms. Let’s explore what’s happening, how it might affect pharmaceutical companies, and what it means for your investments.
What’s the Big News?
The government is pushing two major ideas to tackle high drug costs:
- Lowering U.S. Drug Prices: President Trump signed an order to match U.S. drug prices to the lowest prices in other developed countries, like Canada or the UK. This “most favored nation” (MFN) plan could save Americans money but has drug companies worried about their profits.
- Tariffs on Imported Drugs: There’s talk of adding taxes on drugs and ingredients made overseas, especially from places like China and India. This could make medicines more expensive or harder to get.
These changes aren’t set in stone yet. Drug companies and industry groups are pushing back, saying these rules could hurt their ability to create new medicines. Legal challenges might delay or stop these plans, but they’re already causing ripples in the stock market.
Can Other Countries Handle These Changes?
Many drugs and their ingredients come from lower-cost countries like India, China, and parts of Europe. But can these places adapt if the U.S. changes the rules? Here’s a quick look:
- India: India makes a lot of affordable generic drugs for the U.S. If prices have to rise to match U.S. levels, it could strain their low-cost system. Plus, tariffs might make it harder to ship drugs here, hurting companies like Biocon.
- China: China supplies key drug ingredients. They’re good at producing large amounts, but tariffs could push companies to find other suppliers. Raising prices in China might also upset their local customers.
- Europe: Countries like Germany have strong drug industries and keep prices low through government deals. They’re better prepared for price changes but might face trade issues if the U.S. pushes for higher prices abroad.
These countries are big players, but adjusting to new U.S. rules could be tough. Smaller companies might struggle more than global giants like Novartis.
How Do Drug Prices Compare?
To understand why these changes matter, let’s look at the top-selling drugs worldwide and in the U.S., along with their costs. These numbers show why the U.S. wants to lower prices.
| Drug | What It Treats | U.S. Cost | Cost Elsewhere |
| Keytruda (Merck) | Cancer | ~$10,500 per dose | Australia: ~$3,000; UK: ~$4,500 |
| Ozempic (Novo Nordisk) | Diabetes/Weight Loss | ~$1,300 per month | Australia: ~$130; UK: ~$88 |
| Humira (AbbVie) | Arthritis | ~$7,000 per pen | Canada: ~$2,500; Germany: ~$2,000 |
| Eliquis (BMS/Pfizer) | Blood Thinner | ~$500 for 30 days | France: ~$100; Canada: ~$120 |
| Revlimid (BMS) | Cancer | ~$1,000 per pill | UK: ~$300; France: ~$350 |
What This Means: Drugs cost way more in the U.S.—sometimes 10 times as much! The U.S. purchases a significant share of these drugs, generating significant profits for many companies. If prices drop, their profits could take a hit, which might affect their stock prices.
The RFK Jr. Effect?
Robert F. Kennedy Jr., the new U.S. Health Secretary, is spearheading these changes and has strong controversial opinions about drug companies:
- Tough on Big Pharma: RFK Jr. thinks drug companies focus too much on profits and not enough on people’s health. He supports lowering prices but wants bigger changes, like making it easier to buy drugs directly without middlemen.
- Healthy Living First: He believes we rely too much on medicines. Instead, he pushes for better diets and exercise to prevent illnesses, which could mean fewer drugs overall.
- Leading the Charge: RFK Jr. is in charge of negotiating lower prices. His ideas might make drug companies nervous, especially if he pushes for stricter rules.
His views add a new twist, focusing not just on prices but on how we approach health in general.
How This Might Affect Stocks Prices
So, what does all this mean for the stock market? Here’s what we’re seeing:
- Volatile Stocks: When the pricing order was announced, drug companies like Pfizer and Merck were hit hard. They’ve since bounced back a bit (Pfizer up 2%, Merck up 4%) as investors think the changes might get delayed.
- Profit Worries: Lower U.S. prices could shrink profits, especially for companies that rely on American sales. Tariffs might also raise costs for companies using overseas factories.
- Supply Issues: If tariffs make it harder to pay for drugs or ingredients, some companies could face shortages, which might hurt their stock price.
- Future Risks: Less money could mean fewer innovations or new drugs, which might slow growth for companies focused on innovation.
The stock market is watching closely. Some think these rules won’t stick, but others worry about tougher regulations ahead, especially with RFK Jr. involved.
What Should You Do?
These changes could shake up the pharmaceutical industry, but the future isn’t clear yet. Stocks might stay bumpy as news unfolds. At Stonewater Financial, we recommend staying informed, making necessary adjustments to your holdings as evidence unfolds and talking to a financial advisor to see how these changes fit into your investment plan.
Disclaimer: This blog post is for informational purposes only and is not investment advice. Investing involves risks, including the potential loss of principal. Past performance does not guarantee future results. Please consult a financial advisor before making investment decisions.
References
Arnold & Porter. (2025, April 15). Trump administration takes next steps toward pharmaceutical tariffs.Arnold & Porter
Axios. Alberty, E. (2025, May 16). Pharma — big and small — braces for Trump tariffs.Axios
Axios. Owens, C. (2025, May 13). Pharma is facing its nightmare scenario.Axios
Pharmaceutical Research and Manufacturers of America (PhRMA). (2025, May 13). Statement on Most-Favored-Nation Executive Order.phrma.org
Reuters. Holland, S., Erman, M., & Wingrove, P. (2025, May 13). Trump executive order demands pharma industry price cuts.Reuters
Reuters. Yr Carlsson, I., & Breusch Rasmussen, L. (2025, May 16). Denmark says its life-science firms challenged by Trump order to cut drug prices.Reuters
The White House. (2025, May 12). Fact sheet: President Donald J. Trump announces actions to put American patients first by lowering drug prices and stopping foreign free-riding on American pharmaceutical innovation.The White House
This post is intended solely for informational purposes and should not be construed as a solicitation or recommendation to buy or sell any security. Past performance is no guarantee of future results. All opinions are subject to change without notice.
