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Trump pharmaceutical tariff threat lessens after Pfizer deal
U.S. President Donald Trump shakes hands with Pfizer CEO Albert Bourla (L) as he announces a deal with Pfizer to lower Medicaid drug prices in the Oval Office of the White House on September 30, 2025 in Washington, DC.
Win Mcnamee | Getty Images
President Donald Trump’s long-awaited threat to impose pharmaceutical tariffs may not pose as much of a challenge as drugmakers once feared, following his new drug-pricing deal with Pfizer.
Trump’s Tuesday agreement with the company to voluntarily lower U.S. drug prices included a three-year exemption from pharmaceutical-specific tariffs, as long as the firm further invests in domestic manufacturing. Pfizer on Tuesday pledged to put $70 billion into U.S. manufacturing and research, on top of previous investments.
That deal brought relief and clarity to Pfizer and the broader pharmaceutical industry, signaling that many drugmakers could strike similar deals that would make them immune to the levies for most of Trump’s term.
The Trump administration also made it clear that it will try to secure those drug-pricing agreements before it imposes tariffs. Commerce Secretary Howard Lutnick on Tuesday said he will let companies finish their negotiations with the administration before setting pharmaceutical-specific levies under the legal authority known as Section 232.
Trump on Tuesday said he’s working with other drugmakers to secure similar pacts over the next week, and the White House confirmed that Eli Lilly is expected to strike the next drug-pricing deal. The vast majority of major pharmaceutical companies, including Eli Lilly, Johnson & Johnson, AstraZeneca, AbbVie, Roche, Novo Nordisk, and Amgen have unveiled new U.S. investments in manufacturing or research facilities in recent months to build goodwill with the president.
Shares of Pfizer and several other drugmakers rose on Tuesday following the agreement. Eli Lilly’s stock ended 5% higher and shares of AbbVie and AstraZeneca climbed more than 3%, while J&J and Bristol Myers Squibb’s stocks increased more than 2% each.
The Pfizer deal adds certainty for drugmakers and shifts the president’s policies “potentially away from Pharma tariffs,” BMO Capital Markets analyst Evan Seigerman said in a note on Tuesday.
“Today’s deal seems to set a path for other pharmaceutical players to follow, allowing for headline pricing concessions and a Trump ‘win’ without more punitive implementation” of the president’s so-called most favored nation policy or tariffs, Seigerman added.
Trump in May signed an executive order reviving that controversial plan, which aims to tie the prices of some medicines in the U.S. to the significantly lower ones abroad. As part of that effort, Trump in July sent letters to 17 drugmakers — including Pfizer — calling on them to take steps to lower drug prices by Sept. 29.
“As we think about the group more broadly, we would not be surprised to see a number of similar agreements to help remove uncertainty on the [most favored nation policy and] tariffs,” JPMorgan analyst Chris Schott said in a note on Tuesday.
‘Most favored nation’ risk may be manageable
Tuesday’s deal appeared to bring other good news to some drugmakers.
Pfizer agreed to sell its existing drugs to Medicaid patients at the lowest price offered in other developed nations, or what Trump calls the most-favored-nation price. But Schott said most-favored-nation pricing for Medicaid is “highly manageable” for Pfizer. He said that’s in part because Medicaid pricing is already similar to international levels for most drugs.
Notably, Medicaid represents less than 5% of the company’s U.S. sales and an “even smaller percentage of global sales,” Leerink Partners analyst David Risinger said in a note on Tuesday.
The same goes for many of the large drugmakers, according to data compiled by Schott. Medicaid makes up less than 5% of Bristol Myers Squibb’s U.S. sales, less than 7% of Regeneron’s domestic revenue and around 8% of Lilly and AbbVie’s domestic sales.
Medicaid also represents around or less than 10% of U.S. sales for all of J&J, Merck, Amgen and Biogen.
Gilead is among the drugmakers with greater exposure to Medicaid, with the program making up around 20% of its domestic sales. Medicaid plays a large role in HIV prevention and treatment, especially for underserved populations, which is a core focus for Gilead.
The other part of Pfizer’s deal involves the company guaranteeing the same “most-favored-nation” pricing on its new drugs for Medicare, Medicaid and commercial payers. But Schott said he sees a “limited impact” of that provision, as he expects Pfizer and the broader industry to raise their prices for new drugs abroad rather than lower them in the U.S.
He added that it will likely apply to a small number of treatments each year and is “much more digestible” for the company than any broad implementation for products already on the market.
