Instacart downgraded as competition tightening grip on online grocery
Investing.com -- Pfizer and U.S. President Donald Trump on Tuesday unveiled a deal under which the drugmaker will cut Medicaid prescription drug prices to match those charged in other developed markets in exchange for tariff relief.
Trump added that Pfizer will apply the “most-favored-nation” pricing to every new drug it introduces in the U.S., and said he expects other pharmaceutical companies to follow the same path.
The pharmaceutical giant will participate in a new White House direct-to-consumer platform, TrumpRx, launching in 2026, where Americans can buy drugs directly.
Several companies have already introduced similar direct pricing models through the PhRMA lobby’s new site, and in some cases have raised prices in Britain to offset planned U.S. cuts.
Pfizer is the first firm to formally commit under pressure from Trump, who in July told 17 drugmakers to lower prices by September 29.
It pledged $70 billion in R&D and U.S. manufacturing investment, while securing a three-year exemption from drug-specific tariffs “as long as, of course, we move the products here,” CEO Albert Bourla said.
Bank of America analysts said the timing of the announcement may have been unexpected, but the deal’s substance was not. A team led by Tim Anderson described it as “mostly performative,” noting that it aligns with their prior view that the sector would avoid serious pain from government price negotiations.
According to the analysts, the measures likely carry little financial impact for Pfizer yet deliver a political win for the administration and some lower costs for patients.
Pfizer’s shares rose nearly 7% on the news.
Both the White House and Pfizer press releases were short on detail, but read as largely benign, the analysts added.
“Direct purchasing” at lower retail prices is expected to help only a small group of patients, since most are covered by insurance. Medicaid already pays some of the lowest prices due to statutory rebates, while tariffs appear unlikely to materialize in a meaningful way.
The analysts also noted that closing the gap between U.S. and overseas pricing often results in ex-U.S. prices rising, which is already evident.
“Tuesday’s news is good for PFE (and other drug companies), but the bigger challenge the industry faces is all of the patent expiries that lie ahead on many large drugs,” analysts said.
“PFE has its fair share of these, which is why its valuation is on the lower side. Arguably, its comparatively low P/E multiple and its high dividend yield (~7%) likely help put in a floor under the share price, but the longer-term growth outlook remains challenging,” they added.
BofA maintained its Neutral rating on Pfizer shares with $28 price target.