Shopee Merchant Edition Trump gives pharmaceutical giants 60 days to lower prices

1. Trump’s tough measures and motivations

(1) Direct threats and deadlines

Trump did not resort to legislation or negotiations, but instead used executive orders and public statements to exert pressure, similar to his tariff policy style.

Possible punitive measures include:

Cancelling patent protection (forcing generic drug competition)

Restricting medical insurance reimbursement (such as Medicare refusing to pay for high-priced drugs)

Imposing a “windfall profit tax” (similar to drug price controls in some European countries)

(2) Political considerations for the general election

Winning over elderly voters: People aged 65 and over in the United States account for 23% of voters and are sensitive to drug prices (for example, insulin prices have become a political symbol).

Fighting the “Biden health care” narrative: Trump needs to prove that he can lower medical costs better than the Democrats.

(3) Continuing the policies of his first term

In 2018, he promoted “most-favored-nation” drug prices (benchmarking the lowest international prices), but was stopped by the court.

This time, he may try tougher administrative measures to bypass congressional resistance. 2. Pharmaceutical industry response and market impact

(1) Stock market plummets, market value evaporates

Eli Lilly fell 5% (market value shrinks by $15 billion+) due to the risk of price cuts on its diabetes drug Mounjaro/Zepbound.

Pfizer fell 4%, and profits from cancer drugs and COVID-19 vaccines may be under pressure.

The biotech sector (XBI index) fell 3%, and the market is worried about the decline in the industry's overall profit margin.

(2) Pharmaceutical companies fight back: warning of supply shortages and stagnant innovation

Merck's CEO said: "Forced price cuts will force companies to cut research and development, and new cancer drugs may decrease in the future."

PhRMA (American Pharmaceutical Research Association) stated: "Government intervention will undermine the global pharmaceutical innovation ecosystem."

(3) Investors worry about long-term policy risks

If Trump is re-elected, drug price controls may be expanded to European-style "reference pricing", threatening the industry's profit model. 3. Policy feasibility analysis

(1) Legal challenges are inevitable

Pharmaceutical companies may sue, citing the Fifth Amendment (prohibiting the government from expropriating property without compensation), claiming that forced price cuts are tantamount to "confiscation of patents."

The Supreme Court has a conservative majority, but the justices may be inclined to limit the expansion of executive power.

(2) Alternative: Negotiation rather than coercion

Refer to Biden's Inflation Reduction Act (IRA): Medicare is allowed to negotiate some drug prices, but the scope is limited.

Trump may expand the scope of negotiations, but this requires the cooperation of Congress (it is difficult to pass in a divided Congress at present).

(3) International linkage risks

If the United States forcibly lowers prices, pharmaceutical companies may increase prices in Europe/Asia to compensate for losses, causing global drug price fluctuations.

4. Political and livelihood impacts

(1) Short-term benefits for voters, long-term doubts

If price cuts are achieved: the prices of commonly used drugs such as insulin will fall, directly benefiting patients and increasing Trump's approval rating.

But the possible cost is: pharmaceutical companies will reduce the production of cheap drugs (such as generic drugs) or withdraw from the US market. (2) Democratic Party response: questioning Trump's sincerity Biden's team said: "Trump did not actually reduce drug prices during his tenure, and now it is just an election gimmick." Progressives demand more radical measures, such as abolishing drug patents or establishing state-owned pharmaceutical factories. (3) Public opinion is divided Conservatives support cracking down on "Big Pharma's excessive profits." Liberals are suspicious of Trump's relationship with pharmaceutical companies (such as appointing pharmaceutical executives to the cabinet). 5. Conclusion: High-risk game, market turmoil will continue Trump's "60-day ultimatum" is a typical high-pressure business war + political show, but it faces three contradictions: Legal risks: forced price cuts may be rejected by the court; Industry rebound: pharmaceutical companies may reduce investment in the United States; Policy sustainability: without systematic reforms, short-term price cuts will be difficult to sustain. Key observation points in the future: Whether pharmaceutical companies will compromise (some companies or local prices will be reduced in exchange for exemptions); Trump's specific measures (the content of the executive order determines the degree of market panic); The direction of the election (if polls show voter support, Trump may double down on pressure).

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