Pfizer-Trump agreement marks turning point in drug pricing debate

Pfizer takes the first steps toward investor certainty in the sector
Pfizer and President Trump announced an agreement covering: MFN pricing in Medicaid (a channel representing <5% of Pfizer’s US sales), a global pricing framework for new drugs, discounted direct-to-consumer sales via “TrumpRx,” and a USD 70 bn US manufacturing/R&D investment. Pfizer CEO Albert Bourla emphasized that the company had met all of Trump’s demands laid out in his August 1 letter (and earlier executive order).

We view this as a favorable outcome
Medicaid is already the most discounted channel, with limited revenue impact across the industry, and global alignment could lift European retail prices (though rebates are likely to offset this in socialized systems). TrumpRx mirrors existing PhRMA and individual company proposals; while its utility may be limited, reducing reliance on PBMs could prove a long-term positive. Other companies are expected to follow Pfizer’s lead, with the administration signaling tariffs as leverage but pausing the Section 232 investigation. While questions remain, Pfizer stated that the deal provides pricing clarity - implying that further measures, such as MFN demonstration projects, are off the table.

Healthcare sector implications
We see this as a potential clearing event, though volatility may persist given unresolved issues and an unpredictable administration. Drug pricing reform has long been a bipartisan focus, yet the sector has historically traded near parity with broader equities (at a 0.4 % discount). Today, valuations sit near 10-year lows at a 19 % discount, leaving room for re-rating as clarity builds - particularly for companies with strong pipelines. In the near term, positive biopharma news could drive rotation into healthcare as government shutdown risks put pressure on cyclicals.

*1-year forward P/E relative for MSCI World Healthcare versus MSCI World