WASHINGTON, Sept 30 (Reuters) - President Donald Trump on Tuesday said Pfizer (PFE.N), opens new tab will cut the price of all prescription drugs in the Medicaid program for low-income Americans and sell new medicines at a "most-favored- nation" price in exchange for tariff relief.
Trump also said he expects other drugmakers to follow suit.
Shares of Pfizer and Eli Lilly (LLY.N), opens new tab, which was flagged favorably by Trump during his press conference, rose, as did those of Merck (MRK.N), opens new tab, Amgen (AMGN.O), opens new tab, AbbVie (ABBV.N), opens new tab and GSK (GSK.L), opens new tab on investor relief that they would escape the worst of tariffs.
U.S. patients currently pay by far the most for prescription medicines, often nearly three times more than in other developed nations, and Trump has been pressuring drugmakers to lower their prices to what patients pay elsewhere.
Pfizer will be part of the White House's new direct-to-consumer website for Americans to buy drugs, called TrumpRx, that will launch in 2026.
"The United States is done subsidizing the healthcare of the rest of the world," Trump said, speaking at an event in the Oval Office accompanied by Pfizer CEO Albert Bourla, Health Secretary Robert F. Kennedy Jr. and others.
PFIZER DEAL INCLUDES 3-YEAR GRACE PERIOD
On September 25, Trump announced he would impose a 100% tariff on imports of branded or patented pharmaceutical products from October 1, unless a drugmaker is building a manufacturing plant in the U.S. The U.S. has been doing a national security investigation, or 232 probe, to determine tariffs for pharmaceuticals.
Pfizer is the first drugmaker to announce a deal. Trump sent letters to 17 leading drug companies in July telling them to slash prices to match those paid overseas - a policy the president has called most-favored-nation pricing. He asked them to respond with binding commitments by September 29.
Sources at five large drugmakers told Reuters the Trump-Pfizer announcement caught their companies by surprise and that they watched the White House press conference to gauge its implications.
Pfizer will invest $70 billion in research and development and domestic manufacturing and received a three-year grace period during which its products will not be subject to the pharmaceutical-targeted tariffs, "as long as, of course, we move the products here," Bourla said.
Pfizer said a large majority of its primary care treatments and some select specialty brands will be offered at savings that will range as high as 85% and on average 50%. According to a poster on display at the event, those will include rheumatoid arthritis drug Xeljanz, which carries a list price of over $6,000 a month, migraine treatment Zavzpret, dermatitis drug Eucrisa and post-menopausal osteoporosis medication Duavee.
Pfizer shares jumped 6.3% to $25.36.
OTHER DIRECT-TO-CONSUMER PROGRAMS
Several drugmakers have set up direct-to-consumer pricing for some of their drugs, to be listed on a new website from the U.S. lobby group PhRMA, and raised the prices of their therapies in Britain in line with Trump's desire to offset price decreases in the U.S.
Bristol Myers Squibb (BMY.N), opens new tab and Pfizer announced in July that they will start selling their blockbuster blood thinner Eliquis directly to cash-paying U.S. customers.
While the program targeted at the small percentage of uninsured or underinsured Eliquis patients offers a 43% discount from the list price, the drug will still cost more than nine times the average out-of-pocket cost paid by commercially insured patients.
Bernstein analyst Courtney Breen said Pfizer's announced price cuts would not have a material impact on its finances, and for the sector, "today’s announcement appears to be the beginning of the rebound."
According to Medicare Director Chris Klomp, most-favored-nation pricing is based on the lowest price paid in a group of other wealthy countries after fees and rebates.
The U.S. has been engaged in one-on-one talks with the companies, Health Secretary Robert F. Kennedy Jr. said at a cabinet meeting last month, adding that Commerce Secretary Howard Lutnick was using the threat of tariffs on the industry for additional leverage.
LAUNCH PRICES HAVE BEEN RISING
The launch prices of drugs in the United States have been rising significantly in recent years. Many new medications enter the market at annual prices in the hundreds of thousands of dollars, leading to questions about whether patient benefits are worth the cost.
A Reuters analysis found that U.S. prices for newly-launched pharmaceuticals more than doubled last year to a median of $370,000 compared to $180,000 in 2021.
More than 70 million people are covered by Medicaid, the state and federal government program for low-income people. Another 65 million people are enrolled in the government's Medicare program, which covers people aged 65 and older or who have disabilities and is not included in Tuesday's announcement.
Medicare's drug spending reached $216 billion in 2021, while Medicaid's gross spending was around $80 billion. For Medicaid, drugmakers are required to pay rebates, which in 2021 brought its net drug spending to about $38 billion, according to the Kaiser Family Foundation.
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