President Donald Trump announced on Sunday evening that he would sign an executive order aimed at reducing prescription drug prices in the United States by linking them to prices paid in other wealthy nations.
The move, posted on Truth Social, revived a controversial pricing model known as the “most favored nation” (MFN) approach.
The plan would effectively cap US prices for certain drugs at the lowest rate paid by peer countries.
Trump offered few details on which drugs or insurance programs would be affected, leaving critical questions about implementation unanswered.
“Our Country will finally be treated fairly, and our citizens Healthcare Costs will be reduced by numbers never even thought of before,” he wrote.
While the order does not immediately change federal policy, it signals a renewed effort to address soaring drug costs ahead of the election season, with potential implications for pharmaceutical firms worldwide.
From Chugai to Sun Pharma: Asian pharma stocks fall sharply in response
Markets in Asia were among the first to react, with pharmaceutical shares plunging on Monday amid fears that reduced prices in the US—the world’s largest market for medicines—could significantly dent profits.
In Japan, the drug sector was the weakest performer on the Topix index.
Chugai Pharmaceutical fell as much as 10%, marking its sharpest drop in over a year. Daiichi Sankyo lost 7.8%, and Takeda Pharmaceutical fell over 5%.
In Hong Kong, BeiGene Ltd. dropped 8.8%, while Innovent Biologics shed 6.4%.
South Korean firms SK Biopharmaceuticals, Celltrion, and Samsung Biologics each fell more than 3%.
Indian drugmakers Sun Pharmaceutical, Lupin, and Aurobindo Pharma posted declines between 3% and 7%.
The market rout reflected concern that a pricing overhaul in the US could erode revenue for companies that rely heavily on American sales.
Rule likely to apply to Medicare drugs; analysts flag challenges to implementation
The White House has yet to provide full details of the executive order. According to a report by Politico, the MFN pricing principle would initially apply only to a selection of Medicare-covered drugs.
Stephen Barker of Jefferies Japan pointed out that Trump’s latest initiative mirrors an earlier proposal to cap Medicare drug prices—a move struck down in federal court after pushback from pharmaceutical companies.
Nonetheless, Barker warned that a renewed push targeting Medicare and Medicaid, which together account for roughly 40% of US drug sales, could result in serious revenue reductions across the sector.
Shares of Japan’s Astellas Pharma and Otsuka Holdings, both of which derive significant revenue from US operations, lost more than 4% following the news.
Hidemaru Yamaguchi of Citigroup Global Markets Japan described the plan’s feasibility as “questionable,” but noted that its mere announcement had already shaken investor sentiment.
“The devil still may be in the details,” said Michael Risinger, a healthcare strategist. “We’ll have to see whatever that detailed plan is… and then watch future developments.”
Evan Seigerman of BMO Capital Markets emphasized that the executive order would likely be confined to the Inflation Reduction Act framework introduced under President Biden, which already mandates price negotiations for a small number of high-cost drugs.
Seigerman added that the federal government currently lacks authority to set prices in the commercial market, and any attempt to broaden the order’s reach could face strong opposition in the Republican-controlled House.
Still, the uncertainty surrounding the order is adding volatility to global pharma stocks.
S&P 500 Pharma industry index down by 10% over 3 months
The extent of pricing pressure and potential tariffs remains unclear, but the prevailing uncertainty is already dragging down pharmaceutical stocks in the US as well.
The S&P 500 Pharmaceuticals industry index has declined nearly 10% over the past three months, and analysts caution that it may be too early to declare a bottom for the sector.
The US pharmaceutical market is a cornerstone of global drug revenues.
Seven of the ten largest pharmaceutical firms by market value are American, and even foreign giants like Novartis, Sanofi, and Novo Nordisk derive more than half their income from US sales.
Eli Lilly, the world’s most valuable drugmaker, earned 67% of its 2024 revenue from the US Johnson & Johnson, the largest by revenue, earned 57%.
Industry executives have warned that pricing cuts could jeopardize research and development, already an expensive and risky process.
Around 90% of drugs entering Phase 1 clinical trials never reach the market, and development timelines can stretch up to 15 years.
In a Barron’s report, an Eli Lilly spokesperson called the MFN model “a misguided attempt at addressing drug prices that would do nothing for patients while jeopardizing the nearly $200 billion in new US investments recently announced by biopharmaceutical companies.”
Calls for global responsibility and balanced policy
Chris Boerner, CEO of Bristol Myers Squibb, expressed concern that unilateral US pricing reforms could undermine global R&D investment.
In an op-ed for STAT, he urged other wealthy nations to increase their contributions to healthcare innovation rather than depend disproportionately on US spending.
“Slashing US investment in medicines or importing lackluster policies of less innovative health care systems is not the answer,” Boerner wrote.
For now, the global pharmaceutical industry faces a renewed test of its pricing power in its most profitable market, with investors bracing for continued volatility in the months ahead.
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