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Last week, American pharmaceutical company Pfizer reached a deal with U.S. President Donald Trump, which investors saw as a positive sign for the pharmaceutical industry’s ability to survive the threat of major price cuts and tariffs on imported drugs.

Political concerns overshadowed the sector for most of the year, and stock prices declined, but healthcare specialist Tim Oppler from Stifel Investment Bank stated that the top 30 life sciences companies (including pharmaceutical firms) gained $440 billion last week, adding: “It appears that Trump’s policies on tariffs and pricing are unlikely to affect pharmaceutical companies as badly as feared,” according to the Financial Times.

Trump’s Position

Since May, Trump has threatened pharmaceutical companies with tariffs on imports if they do not agree to lower prices. He has repeatedly mentioned that people can get new popular weight-loss drugs in London at a very low cost compared to the United States, where branded drug prices are on average two to three times higher than in Europe.

However, in the absence of legislation regulating drug prices, these threats are difficult to enforce. During Trump’s first term, the pharmaceutical industry overcame his pricing control proposals through the courts. Nevertheless, Trump continued to pressure, threatening tariffs up to 200% during the summer, then last month stating tariffs would be 100%, but only on branded drugs. Imports from the European Union would face a 15% tariff, in line with a trade agreement made in July.

In July, Trump demanded 17 pharmaceutical companies provide binding commitments to lower drug prices by September 29, forcing companies to choose between making a deal or preparing for a long battle. Albert Bourla, Pfizer’s CEO, chose to agree, offering some drugs at lower prices and selling directly to patients. Ultimately, he celebrated publicly at the White House, and the company’s shares surged.

Nearly all major pharmaceutical companies committed to serious investments in research, development, and manufacturing in the U.S., including Pfizer’s $70 billion pledge, and $50 billion each from Roche and AstraZeneca, and $27 billion from Eli Lilly.

Drug Companies Raise Prices Outside America

Trump recently said pharmaceutical companies investing in manufacturing would be exempt from tariffs.

Some companies raised drug prices in Europe to appease the president, who has long complained that high U.S. prices support innovation elsewhere.

Eli Lilly increased the price of its weight-loss drug (Mounjaro) for private patients in the UK by up to 170%, while Bristol Myers Squibb announced it would sell its new schizophrenia drug (Clozapine) in the U.S. at the same price as in the UK. Meanwhile, the UK government proposed up to a 25% increase in what it is willing to pay for drugs for the National Health Service.

In the U.S., the pharmaceutical sector launched more direct-to-consumer sales services to offer cheaper drugs, drawing attention to the role of pharmacy benefit managers—intermediaries between drug companies and patients—in raising prices in the U.S.

For investors, the deal was not promising as Pfizer voluntarily agreed to lower prices on some drugs, which seems contrary to its pledge to maximize shareholder profits.

However, not all drugs are covered, and Pfizer will avoid import tariffs for three years. The “most favored nation” pricing controls Pfizer agreed to apply only to drugs provided through Medicaid, the government-supported insurance for low-income individuals.

Under the most favored nation policy, prices align with the lowest levels offered in comparable countries.