Pharmaceutical Industry Faces Market Shakeup as Drug Price Reforms Take Centre Stage

President Donald Trump has issued an executive order aimed at tackling high drug prices in the United States, sparking concern and volatility across the global pharmaceutical industry. The announcement marks a renewed attempt to align America’s drug prices with those of other developed nations, intensifying pressure on multinational companies.

During a White House press conference, Trump declared that the United States, which pays some of the highest drug prices globally, would not continue subsidising healthcare for foreign countries through inflated domestic costs. His order includes price targets for drugmakers with the threat of further measures if significant progress is not achieved within six months.

The pressure on pharmaceutical giants such as AstraZeneca and GlaxoSmithKline (GSK) was evident as stock prices fluctuated following the announcement. AstraZeneca, which initially saw its share price drop to £99.43 before rebounding to £102.72, recorded minor gains by market close. GSK also witnessed an uptick, ending the day with a 1.6 per cent rise to £13.99½p. Both companies derive significant revenues from the US, the world’s most lucrative healthcare market.

Analysts have noted the challenges of implementing Trump’s proposals, particularly given the pharmaceutical sector’s history of resisting similar reforms. A prior 2020 attempt to benchmark drug prices against Organisation for Economic Co-operation and Development (OECD) nations during Trump’s first term failed after facing industry opposition and a federal court blockade. Although reforms under President Joe Biden’s administration led to Medicare gaining the authority to negotiate certain drug prices through the 2022 Inflation Reduction Act, prices remain significantly higher than in other high-income nations.

Trump’s executive order escalates concerns within the industry, with multinational companies warning of potential disruptions to funding for research and development, which is predominantly financed by US revenues. Stephen J Ubl, the head of the Pharmaceutical Research and Manufacturers of America, argued that middlemen and inequitable contributions from foreign governments are the real drivers of high US prices. He added that an enforced price reduction would undermine pharmaceutical innovation.

Meanwhile, Trump has vowed to impose tariffs on manufacturers that fail to lower US drug prices to levels comparable with other markets. Industry experts believe the administration intends to push the pharmaceutical sector into a compromise. However, doubts persist about whether the initiative will gain congressional support or overcome logistical hurdles in its execution.

The wider implications for healthcare policy, global pharmaceutical markets and investment in innovation continue to be debated. Analysts and investors are closely monitoring the situation, while some expect further turbulence as the details of the executive order unfold in the coming months.