Trump vows to cut drug prices by 59%, pharma stocks plummet

President Donald Trump’s announcement of a plan to sharply cut US prescription drug prices sent shockwaves through the global pharmaceutical industry. This caused a major sell-off in stock markets around the world.

In a Truth Social post found by Bloomberg, Trump promised to reduce drug prices by 59%, bringing them in line with the lowest prices found in other wealthy nations. He called current US drug pricing unfair, saying Americans were being taken advantage of by paying extremely high costs. His “most-favored-nation” policy, as he described it, could reshape the US pharmaceutical market and has created widespread uncertainty and worry among industry leaders.

The market reaction was immediate and severe. Stocks of major US drugmakers dropped significantly. According to Bloomberg, AbbVie, Amgen, Pfizer, Eli Lilly, and Merck all saw pre-market declines between 2.2% and 3.7%. The effects were felt worldwide, with international pharmaceutical companies also under pressure. AstraZeneca, GSK, and Roche in Europe; Biocon and Lupin in India; CSL Ltd and Mayne Pharma Group in Australia; Daiichi Sankyo in Japan; and Alphamab Oncology in Hong Kong all saw big losses.

Trump vows to drop drug prices

This move could have huge effects on the pharmaceutical industry. Medicare and Medicaid, the US government-run health insurance programs for seniors and low-income individuals, make up a large part (about 40%) of US drug sales. Because of this, any major price cuts in these programs could seriously hurt the profits of drug companies, both in the US and abroad.

One of the biggest concerns is the lack of details about how Trump’s plan would work. It is unclear which drugs or even which government programs would be affected. This uncertainty is making investors nervous, as it is hard to predict the policy’s full impact. The chance of legal battles from drug companies with a history of fighting against price controls adds even more doubt.

This latest effort is similar to past attempts to regulate drug prices, but could have much bigger consequences. During Trump’s first term, a proposal to limit Medicare drug prices was challenged in court and eventually blocked. The Inflation Reduction Act, passed under President Biden, allowed for price negotiations on some expensive drugs in Medicare, but it was much narrower in scope than Trump’s current plan.

A look at drug prices in different countries shows the differences Trump wants to fix. Keytruda, Ozempic, Brukinsa, Loqtorzi, and Leqembi are all priced much higher in the US than in Japan or China. Trump’s plan aims to close this gap, but whether it can actually be done remains unclear.

International drug companies, especially those that rely heavily on the US market, could face major risks. Firms with a large share of their revenue coming from US sales might see big drops in profits if Trump’s plan goes into effect.