Pharmaceutical stocks tumble on Trump’s plan to cut US drug prices

TOKYO – Shares of pharmaceutical firms fell across the world after

US President Donald Trump said he planned to order a cut in US prescription drug costs

to bring them in line with those of other countries, prompting concern that profits would take a hit.

Shares in US drugmakers were weaker, with Eli Lilly & Co, Pfizer, Bristol-Myers Squibb and Merck & Co all down in pre-market trading in New York.

European drugmakers including Novo Nordisk, AstraZeneca and Roche Holding slid, missing out on a broader rally, while in Asia, the pharmaceuticals subgroup in Japan’s Topix Index posted its biggest one-day loss since August 2024.

In South Korea, SK Biopharmaceuticals, Celltrion and Samsung Biologics all fell over 3 per cent. In Hong Kong, BeiGene tumbled as much as over 5 per cent and Innovent Biologics fell 3.7 per cent. 

Indian pharmaceutical stocks dropped 1.6 per cent on May 12, in contrast with broader market gains as India reached and held a ceasefire with Pakistan over the weekend after four days of cross-military strikes.

Several Indian drugmakers earn a significant share of their revenue from North America by selling low-cost generic versions of newer drugs.

The declines come after Mr Trump said on social media that he intends to sign an executive order lowering the price of prescription medicines at 9am on May 12 in Washington, after reports emerged of the plan last week. The announcement is pressuring drug-related stocks, on worries their profits would take a hit if they have to reduce prices in the US.

Although the feasibility of Mr Trump’s plan is “questionable”, his announcement is negative for the pharmaceutical sector, Mr Hidemaru Yamaguchi, a healthcare sector analyst at Citigroup Global Markets Japan, wrote in a note. 

Firms that depend on the US for a large chunk of sales, including Japan’s Takeda, Astellas Pharma and Otsuka Holdings, are especially vulnerable, he added. Shares of Astellas and Otsuka were also lower on May 12.

For the European pharmaceuticals sector, companies such as Novo Nordisk, AstraZeneca, Roche, Novartis, GSK and Sanofi generate between roughly 40 per cent and 60 per cent of their revenues in the US, according to data compiled by Bloomberg.

Americans pay the most in the world for medicines, fuelling innovation and driving the growth of the industry.

Drugmakers have said revamping the system would slash revenue and stifle the development of breakthrough therapies that have the potential to lengthen and improve lives.

Mr Trump cited the industry’s argument, but said it meant “the ‘suckers’ of America” ended up bearing those costs “for no reason whatsoever”. His social media post did not detail how the order would work, or any limits that may apply.

It is not the first time Mr Trump has had high drug costs in his sights. His plan seems similar to one proposed during his first term aimed at capping Medicare drug prices, Mr Stephen Barker, an equities analyst at Jefferies Japan, wrote in a note. 

The effort was struck down in federal court after drug companies challenged it, claiming the administration had not properly carried out the rule-making process.

Still, a renewed push to lower drug prices may have an “enormous” impact on the sector’s revenues, Mr Barker said. That is because Medicare, a government-funded programme that offers health insurance for people aged 65 or older, and Medicaid, which covers low-income citizens, may collectively account for about 40 per cent of all drug sales in the US, he said.

In Japan, Astellas, Ono Pharmaceutical, Sumitomo Pharma, Shionogi & Co and Eisai may be at risk, according to Mr Barker.

The US government already negotiates prices for some of the highest-cost medicines used in Medicare under the Inflation Reduction Act (IRA), which passed in 2022 under then President Joe Biden, with more slated to be added every year.

Mr Trump’s plan likely affects only the drugs up for price negotiations under the IRA, said Mr Evan Seigerman, head of healthcare research at BMO Capital Markets.

“Importantly, the government has no power to set prices in the commercial market”, and potentially faces resistance from House Republicans to implementing legislation beyond what can be done via the executive order, he said. BLOOMBERG, REUTERS