Core Insights - U.S. pharmaceutical stocks, including Eli Lilly, Pfizer, Merck, AbbVie, Gilead, Bristol-Myers, and Amgen, experienced a recovery in share prices following President Trump's announcement of an executive order aimed at reducing prescription drug prices by 30% to 80% [1][6] - The executive order promotes "most-favored-nation pricing," ensuring that U.S. consumers pay no more than the lowest price offered in other developed countries [3][4] - The Department of Health and Human Services (HHS) is tasked with creating programs for Americans to purchase drugs directly from manufacturers at these lower prices [4][5] Executive Order Details - The executive order was issued to address the high cost of prescription drugs in the U.S., which can be five to ten times higher than in other countries [3] - The order includes provisions for the Secretary of Commerce and U.S. Trade Representative to take action against foreign countries that suppress drug prices unfairly [5] - If drug prices do not decrease promptly, a rule will be proposed to enforce these pricing measures [5] Market Reaction - The immediate impact of the executive order on drugmakers was unclear, but the market reacted positively, with stocks recovering from pre-market declines [6] - The broader market rally, influenced by easing trade tensions between the U.S. and China, also contributed to the rise in drug stocks [6] Historical Context - A similar rule was attempted by the Trump administration in 2020 but was blocked by federal courts [7] - The current executive order is expected to face legal challenges as well [7] Government Initiatives - The U.S. government is already working on controlling healthcare costs through the Inflation Reduction Act (IRA), which allows Medicare to negotiate drug prices directly with manufacturers [8][9] - The IRA has restructured the Medicare Part D program, imposing more liability on drugmakers and introducing penalties for significant price increases [9][10] - The list of drugs eligible for Medicare price negotiations includes high-cost medications for cancer, diabetes, autoimmune conditions, and blood thinners, with more drugs to be added annually [10] Trade Considerations - The Trump administration is also considering tariffs on pharmaceutical imports, which could disrupt global supply chains and increase production costs [11]