As per the executive order, the Trump administration ordered drug companies to voluntarily cut prices of their drugs or face regulatory actions. The order aims to let patients buy drugs directly at the “Most-Favoured-Nation” prices.
This is because US drug prices are more than triple of the prices seen in other The Organisation for Economic Co-operation and Development (OECD) countries. Trump said that US is funding 75% of the global pharma profits, despite being under 5% of the population.
The order aims to align US drug prices with peer nations and prevent further subsidising foreign discounts through inflated domestic prices.
US drugmakers rallied on the announcements as they were not as bad as feared. The street had feared direct price cuts, which did not transpire. Pharma names like Pfizer, Eli Lilly, Amgen, Sanofi, all of them ended higher in regular trading on Wall Street.
There is also no direct fallout on US generic drug pricing due to this order.
The executive order appears to be a grab bag of drug-pricing policies that Trump’s been touting for years and involves a threat to bring the pharmaceutical industry to the negotiating table, though it’s unclear what they would need to do to prevent steep cuts.
Another factor that the street continues to watch is the potential tariffs on the sector.
After opening gap down, the Nifty Pharma and most of its index constituents recovered from the day’s low. The Nifty Pharma index ended above the flat line but underperformed the strong broader market rally on Monday.
