Core Viewpoint - Trump is set to sign an executive order requiring Medicare to implement "Most Favored Nation" (MFN) pricing for certain high-cost drugs, potentially reducing prices by 30% to 80% [1][2]. Group 1: Executive Order and Pricing Mechanism - The MFN pricing strategy aims to compare drug prices with those from OECD countries with GDP per capita at least 60% of the U.S., using a weighted average of international lowest prices and U.S. average sales prices [3][4]. - The implementation will occur over four years, gradually increasing the price alignment to MFN levels, with an estimated average price reduction of about 65% [3][5]. Group 2: Impact on Pharmaceutical Companies - The first list of drugs affected includes approximately 50 high-spending injectable/infusion drugs under Medicare Part B, with Keytruda and Eylea alone accounting for 14% of the Part B budget [5]. - Goldman Sachs estimates that a 65% price reduction could significantly impact various pharmaceutical companies, with exposure levels varying widely [6][7]. Group 3: Medicaid Considerations - Medicaid is identified as a potential second battleground for cost reductions, with a focus on high-spending drugs like Humira and Trulicity, which could see a 10% to 15% impact if MFN pricing is extended [9]. - The White House is lobbying Congress to include Medicaid MFN pricing in budget reconciliation efforts, although there is significant political contention surrounding this proposal [9]. Group 4: 340B Drug Discount Program - The MFN pricing could amplify effects through the 340B drug discount program, which requires drug manufacturers to sell outpatient drugs at discounted prices to certain hospitals [10]. - If MFN pricing lowers the best price for Medicaid, it could increase the unit rebate amount (URA), further reducing the ceiling price for 340B, negatively impacting pharmaceutical companies' net revenues [10]. Group 5: Investor Considerations - Investors are advised to identify companies with high government payment exposure and limited alternatives, particularly those with over 50% revenue from government payers [11]. - Companies with strong pipelines and diversified pricing power are expected to fare better in the face of these pricing pressures [11].