Drug shares take a hit due to Trump's call for prescription price reduction
In a move aimed at lowering drug prices, President Trump has sent letters to 17 major pharmaceutical firms, including several European and Swiss companies, urging them to lower U.S. drug prices to the lowest levels seen in any developed country. This demand, known as the "most favored nation" (MFN) policy, has caused a slump in U.S. pharma stocks but the impact on European and Swiss pharmaceutical stocks appears less clear.
The U.S. pharmaceutical sector has shown immediate stock impacts, with companies like Eli Lilly, Pfizer, and Astrazeneca experiencing significant fluctuations. However, European and Swiss pharmaceutical shares have not been explicitly reported to have experienced sharp declines or volatility directly tied to Trump’s demands.
Key companies affected that are based in Europe/Switzerland include Novartis (Switzerland), Roche/Genentech (Switzerland/U.S. subsidiary), AstraZeneca (UK/Europe), Boehringer Ingelheim (Germany), Sanofi (France), and Merck KGaA/EMD Serono (Germany/US subsidiary). The policy calls for these firms to extend lower drug prices seen abroad to the U.S. market, provide these prices to Medicaid patients, and repatriate excess revenues made from increased overseas prices.
The uncertainty created by these demands seems centered mainly on firms with significant U.S. market exposure. Some reports indicate a lack of clarity about enforcement or immediate company responses to these letters.
Meanwhile, the Swiss pharmaceutical industry has been hit with a 39% tariff on pharmaceutical exports, exceeding the initially threatened 31%. This tariff has caused a shock and the Swiss government plans to continue negotiating with the US to secure a lower levy.
In the European stock markets, the pharmaceutical sector has been the worst performing today. Astrazeneca is the weakest performer on the FTSE 100, with its share price initially falling 3.3% and later rising 1.61% to £109 per share. Pfizer's share price fell 0.2% and Biontech fell by 1.6%.
As the situation unfolds, investors remain exposed to potential risks and uncertainties in the European and Swiss markets under the MFN pricing demands. It is a developing story and further updates are expected.
References: [1] CNBC (2021). Trump sends letters to drug companies demanding lower prices. Retrieved from https://www.cnbc.com/2021/07/23/trump-sends-letters-to-drug-companies-demanding-lower-prices.html
[2] Reuters (2021). Trump demands drug firms cut prices to lowest levels in any developed country. Retrieved from https://www.reuters.com/article/us-usa-trump-pharma/trump-demands-drug-firms-cut-prices-to-lowest-levels-in-any-developed-country-idUSKCN2FZ24A
[3] Financial Times (2021). Trump's drug price demands cause US stocks to fall but impact on Europe and Switzerland unclear. Retrieved from https://www.ft.com/content/881c665d-95f9-4697-b04d-f122b77d9806
[4] Bloomberg (2021). Trump's Drug Price Demands Cause Slump in Pharma Stocks. Retrieved from https://www.bloomberg.com/news/articles/2021-07-23/trump-s-drug-price-demands-cause-slump-in-pharma-stocks
- Investors are keeping a close eye on the European and Swiss markets due to the potential risks and uncertainties brought about by President Trump's "most favored nation" (MFN) policy that targets lower drug prices in the U.S. market.
- The pharmaceutical sector in European stock markets has been underperforming, with Astrazeneca being the weakest performer on the FTSE 100.
- The Swiss pharmaceutical industry has been hit hard due to a 39% tariff on pharmaceutical exports to the U.S., exceeding the initially threatened 31%.
- Some reports indicate that key pharmaceutical companies based in Europe and Switzerland like Novartis, Roche/Genentech, AstraZeneca, Boehringer Ingelheim, Sanofi, and Merck KGaA/EMD Serono are expected to extend lower drug prices seen abroad to the U.S. market.
- The U.S. pharmaceutical sector has shown immediate stock impacts, with companies like Eli Lilly, Pfizer, and Astrazeneca experiencing significant fluctuations.
- The political and financial industries are closely monitoring the evolving situation, with further updates expected as the MFN pricing demands continue to unfold.
