Key takeout
Pharma stocks have been seen in news that they have been undergoing a tough year for medical stocks, lowering the price of President Trump's ultimatum. The outlook for Trump's mission is unknown. Because Congress must leave it to law beyond a smaller pilot program.
The drug stocks fell after President Donald Trump sent a letter to 17 drugmakers with ultimatums to lower drug prices in 60 days. Trump claimed that businesses would sell new drugs to the US at the lowest prices in developed countries (the “most advantageous country” status).
Other requests include expanding Medicaid patients' most preferred national pricing for existing drugs, participating in consumer drug sales, and agreeing to a “explicit agreement” to return revenues from rising international drug prices to the United States. The letter will comply with a May 12 executive order aimed at lowering drug prices.
“The news is a continuation from Trump's executive order in May, and if the pharmaceutical CEO didn't lower US prices and proposed a level close to international prices, he threatened pricing in the potential most favorable country if he threatened 60%-90% in May's comments. “Since then, the pharmaceutical management team met the administration and Robert F. Kennedy Jr., but there has been no move by Pharma to lower prices.
The companies that received the letter were Abbvie Abbv, Amgen Amgn, Astrazeneca Azn, Boehringer Ingelheim, Bristol Myers Squibb Bmy, Eli Lilly Lly, Emd Serono (a subsidiary of Merck Kgaa Mkkgy), and Genentech (a subsidiary of Roche rhhsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens gsciens JNJ, Merck MRK, Novartis NVS, Novo Nordisk NVO, Pfizer PFE, Regeneron Regn, and Sanofi Sny.
The drug strain collapsed Thursday afternoon after a letter about Truth Social was released. Most of the time, the group rebounded on Friday, but Trump's push is more widespread as the latest headwind for industry and healthcare stocks.
The US healthcare sector is struggling this year compared to the Morningstar U.S. Market Index's annual profit of 6.6% compared to the Morningstar U.S. Market Index's annual profit of 3.4% in 2025. Drugmakers have improved a little across the medical sector, which was heavily sought after UnitedHealth's UNH struggles. The Morning Star US Drug Maker Index was 2 in 2025. is.
Trump's Drug Pricing Mission Outlook
This is the latest salvo to push down drug prices. However, his outlook for his mission is unknown, Andersen says. “Trump again threatens the pricing of the most favorable countries and asks them to do this with the Medicaid program by the end of September. This is probably 10% of US drug spending or faces serious consequences, but it's unclear what they are,” she explains.
“The problem with this proposal is that Congress needs to pass on something bigger than a small pilot, which is bigger than a small pilot,” says Andersen. “The Medicaid MFN pricing had already been removed from Trump's one big beautiful bill before its passage, as even Republicans in Congress were concerned that it could lead to significant price cuts in Medicaid prices, such as the 340B Channel, which has pricing based on Medicaid prices. MFN pricing could have a much larger impact on the drug market, perhaps over 20%.
“I think it's unlikely that the MFN bill will pass Congress. It's already been a failure once. I think that a wide range of programs like this seems to have passed a relatively low probability (probably under 10%),” Andersen says. “The most likely outcome is that pharmaceutical companies will work with the Trump administration to help build direct sales for consumers, bypassing intermediaries (pharmacy benefits managers) so that discounts are sent directly to patients.”
Andersen continues: “This is not easy to do with all drugs, but most chronic treatments that allow patients to self-administer pills and pen/automatic injectors. This is a way to reduce spending without reducing prices for innovative pharmaceutical companies. Andersen points out that some pharmaceutical companies have already set up consumer platforms such as Pfizer, Lilly and Novo. Pfizer and Bristol have announced plans to sell cardiovascular drugs, for example.
Pharma inventory performance and evaluation
Of the 17 companies that were sent to the letter, 13 are covered by Morningstar analysts. There is a wide range of performance between groups, and Novo has posted its worst return to this year. Its blockbuster obesity drug, Wegovy, struggles to compete with the cheaper and more common version, so its stock price has fallen by more than 40%.
“It appears investors are nervous about the outlook for biopharma's growth as tariffs are set to put pressure on drug drug costs and the Trump administration may be focusing on drug pricing,” says Andersen. “Overall, we believe that many companies are trading at a discount on fair value after digesting potential tariff hits. Apart from some small pilot programs, it's not part of our valuation as we are not prepared to assume that pricing in the most preferred country is realistic.
Of the 13 pharmaceutical strains covered by Morningstar, seven are undervalued. Pfizer, GSK and Roche are in five-star territory. In other words, analysts believe they are significantly underestimated.
The four companies roughly match the fair value estimates of Abbvie, Amgen, Gilead, and Johnson & Johnson.
Only two Morningstar analysts are considered overrated. Novartis trades with fair value at an 8% premium, while Lily trades at a 14% premium.
