Trump Orders Pharma to Slash U.S. Drug Prices by September

Former President Donald Trump has issued a sweeping demand to 17 major pharmaceutical companies, instructing them to cut U.S. drug prices by September 29, 2025 or face direct government intervention. The letters, sent July 31, threaten structural changes to the U.S. pharmaceutical pricing system and have already rattled investors across the healthcare sector.

Most-Favored-Nation Pricing at the Center of Reform

The letters call for immediate adoption of “most-favored-nation” pricing—forcing companies to match U.S. drug prices to the lowest level charged in peer countries. Trump also pushed for uniform pricing across Medicare and private insurers, elimination of middlemen, and direct-to-consumer distribution options.

The demands echo the May 2025 executive order outlining these reforms. The administration argues that U.S. drug prices are more than three times higher than those in other developed markets, calling the current system “a global subsidy for foreign consumers.”

Pharma Stocks Hit as Investors Reprice Risk

Shares of Pfizer (NYSE: PFE), Merck (NYSE: MRK), AstraZeneca (NASDAQ: AZN), Eli Lilly (NYSE: LLY), and others declined sharply following the announcement. Sector-wide pressure intensified as investors reassessed profit margins, lobbying costs, and litigation exposure.

PhRMA, the industry’s lobbying group, reported a spike in expenditures, while individual firms like Eli Lilly and Merck doubled their lobbying budgets in the second quarter. Analysts expect further political risk hedging as the September deadline approaches.

Legal pushback is expected. Courts previously blocked similar rules during Trump’s first term, and legal experts predict challenges on constitutional and procedural grounds. Still, the administration’s aggressive posture has forced markets to price in serious downside.

Strategic Shift in Global Pharma Policy

The pressure campaign aligns with Trump’s broader “America First” platform. The administration has argued that U.S. innovation is being exploited by governments that negotiate steep discounts while Americans bear the highest costs. Trade officials have linked drug pricing reform to broader tariff threats, particularly targeting Europe and Australia.

Consumer advocacy groups have welcomed the move. U.S. drug spending exceeded $600 billion in 2024, and a growing share of Americans report delaying or skipping medications due to cost. Trump allies, including figures like Mehmet Oz and Robert F. Kennedy Jr., have been vocal about the need for systemic reform.

Pharma executives, however, warn that forced price alignment could disrupt global R&D pipelines. Industry models suggest MFN pricing on Medicaid alone could reduce global drug industry revenue by up to $1 trillion over the next decade.

Sector Rotation and Pricing Volatility Expected

The policy shock has triggered early signs of sector rotation. Investors are shifting toward generic manufacturers, healthcare service providers, and biotech names less dependent on U.S. drug pricing. Bond markets have also shown spread widening among lower-rated pharma issuers.

Regulators at CMS and the FDA have yet to issue implementation guidance. Until then, price discovery remains volatile, especially for firms heavily exposed to U.S. markets. Analysts expect September to be a critical inflection point.

Tips for Traders

• Track large-cap pharma stocks for potential oversold opportunities, particularly Pfizer (NYSE: PFE), Merck (NYSE: MRK), and Eli Lilly (NYSE: LLY).

• Monitor volatility and options flow in healthcare ETFs as the policy deadline nears.

• Watch CMS and FDA updates on pricing mechanisms—implementation timing may shift market expectations.

• Evaluate pharma and biotech credit spreads for signs of repricing in high-yield debt.

• Consider rotating into healthcare service providers and generics with lower exposure to pricing caps.

• Hedge longer-term risk with options strategies around September policy deadlines and litigation cycles.