(Bloomberg) — Pharmaceutical stocks capped off their best week in 23 years as a drug-pricing and tariff deal with the US government helped ease an overhang that’s been weighing on the sector for most of the year.
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The group’s advance was spurred by Pfizer Inc. on Tuesday when it agreed to slash some of its drug prices for Americans enrolled in the Medicaid insurance program in exchange for a three-year reprieve on import tariffs. The New York-based company also agreed to invest $70 billion in the US as part of an agreement with President Donald Trump.
The deal was seen as another sign of easing pressures on the pharmaceutical industry since the president announced possible future tariffs on drug imports in April as well as drug-pricing reforms in May. It followed Trump’s move last week to exempt companies with US manufacturing from pharmaceutical levies in the first signal of relief for the sector.
The S&P 500 Pharmaceuticals Index rallied 11% over the past five sessions, in its best weekly gain since July 2002 when drugmakers surged amid a flurry of positive news including FDA approvals and better-than-expected quarterly reports. Prior to Tuesday, the group had been down about 3.4% for the year.
All in all, Tuesday’s deal was “the second major ‘could have been a lot worse’ moment for the industry in recent days,” according to Adam Crisafulli of Vital Knowledge. “If the Pfizer deal from Tuesday serves as the template for other large pharma and biotech companies, the worst-case scenario will have been avoided,” he added.
That’s because Pfizer’s exposure to Medicaid is low and its agreement with President Trump to provide a most-favored-nation pricing for the government program, is expected to have limited financial impact for the company in the near term.
“Not only is Pharma’s EPS exposure to Medicaid low compared to other channels, we estimate Pfizer is at the low end of the Pharma industry with ~2% of 2025 EPS coming from Medicaid,” TD Cowen analyst Steve Scala wrote in…
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