Trump to Sign Executive Order to Lower Drug Prices in USA

US President, Donald Trump, is expected to sign an executive order today, 12th May 2025, that will lower prices of pharmaceutical drugs in United States by 30%-80%. President Trump has said that under the new policy pharmaceutical firms can charge only that price from US consumers that equals the lowest price that they charge for the drug in any other country across the world. The term most favored nation has been used by the US President. So, for example, if a pharmaceutical company for its drug X charges the lowest price of $1 in a country Y in Africa, then it can charge only $1 for that drug in USA. The most favored nation with regard to pricing of the drug in this case is the country Y in Africa and the company cannot charge more than this price in USA.

Differential Pricing of Pharma Companies Across Markets

Pharmaceutical companies usually charge different prices in different national markets depending on the purchasing power of people in that market and the size of the market. For example, a pharmaceutical company may choose to price the same drug lower in a low-income country and price it higher in a high-income country.

Stocks of Many Pharmaceutical Companies go Down

After this announcement of US President, prices of many pharmaceutical stocks fell across the world. In Indian stock markets, Sun Pharma closed the day down by 3.15%. Divi’s Laboratories closed the day down by 1.29%. In London, AstraZeneca’s stock price is down by 3.14% at 3:51 p.m. IST, 12th May. Pfizer’s stock closed the day yesterday, down by 1.20%.

US market is the biggest market for many Indian pharmaceutical companies. They usually supply cheaper generic versions of drugs, on which patents have expired, to US customers. This decision may also make Indian pharma company cut down prices of their drugs in the US market. This in turn may have an adverse impact on their revenue and profits too.

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Source: https://www.nseindia.com/market-data/index-performances

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