Pricing carve-outs to separate pharma’s winners and losers
The pharmaceutical industry has been making headlines recently, after the administration of U.S. President Donald Trump slapped 100% tariffs on branded and patented drugs But investors say drugmakers’ carve-out agreements on pricing is what will rattle the sector — and create a range of winners and losers as a result. Global pharmaceutical companies who have broken ground on U.S. manufacturing plants will likely escape Trump’s tariffs on certain drug imports that took effect Wednesday. But White House moves to peg the costs of U.S. medicines to global prices — the so-called Most Favored Nation initiative — pose a bigger long-term challenge, as companies look to pursue deals and exemptions. “The noise around Most Favored Nation is of greater importance in our view as this could hit harder,” Henrik Rhenman, founder and chief investment officer of Rhenman & Partners Asset Management, told CNBC. The Trump administration unveiled on Tuesday a pricing agreement with Pfizer to reduce the cost of medications. The deal will see the company lower U.S. prices in exchange for a three-year exemption on tariffs. Pfizer also agreed to ramp up U.S. manufacturing with a $70 billion investment. Similar pacts involving other drugmakers on both sides of Atlantic could now follow – the terms of which may open up a range of active trading opportunities further down the line. “List prices in the U.S. will trend downwards, and discounts will as a result have to be lower, and net prices probably about the same — while opposite forces will be at hand to many countries in Europe,” Rhenman said. “In the long run, our view is that drug prices will likely have roughly the same list prices in the U.S. and the rest of the western world, with ‘secret’ discounts set thereafter, probably with less regard to the ability and willingness to pay.” Stephan Mumenthaler, director-general of Swiss pharmaceutical trade body Scienceindustries, said “mini-deals” involving the country’s drugmakers are likely to follow the Pfizer agreement, according to Reuters. Company fundamentals still key Pharmaceutical stocks in Europe continued their rally on Thursday after the Trump administration’s 100% tariffs on branded and patented drugs took effect. Danish firm Zealand Pharma had advanced 2.7% by 10:30 a.m. London time (5:30 a.m. Eastern time), as Switzerland’s Roche Holdings rose 0.9%, while British drugmaker AstraZeneca was flat. 22Z1-FF mountain 2025-09-29 Zealand Pharma performance Rhenman – whose healthcare-focused hedge fund trades pharma, biotech, med-tech and healthcare services stocks globally across all market caps – said relatively few pharmaceutical companies will ultimately have to pay the full levies. Wednesday’s rally in U.S. pharmaceuticals reflected investors’ perception of an underperforming group of stocks being removed from the “angst” of trade policies, said Jared Holz, healthcare strategist at Mizuho Securities. “Investors look at this as negative for companies that are Medicaid-heavy,” Holz told CNBC’s “Squawk on the Street.” That contrasts with larger, more diversified names like Pfizer or Bristol-Myers Squibb . “The multiples of this group have never been lower – that’s why you’re seeing this relief rally.” He described the advance as a “near-term trading dynamic,” noting that drug pricing remains more of a 2026 event. “We have the loss of exclusivity so the patent issue doesn’t dissipate,” he added. “Near-term this sector trades pretty well, but then we have to go back and look at fundamentally where all these companies stand.”
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