The Trump administration's campaign to bring down prescription drug prices is about to get a lot more crowded. AbbVie Inc. (ABBV) and several other pharmaceutical heavyweights are reportedly set to announce agreements with the U.S. government on Friday, joining a growing list of companies willing to cut select drug prices and meet President Donald Trump's policy demands.
According to Reuters, approximately five companies will be included in Friday's announcement. That would bring the total to ten drugmakers that have agreed to play ball with the administration's pricing reforms. Pfizer Inc. (PFE) kicked things off back in September as the first company to strike a deal ensuring lower prescription prices for American patients.
But this isn't just about individual price cuts. The administration is preparing to roll out a pilot program that would fundamentally change how Medicare pays for drugs by tying payments to the lowest prices manufacturers charge in a group of comparable foreign markets. In other words, if a drug costs less in Germany or Japan, Medicare wants to pay something closer to that price instead of the typically higher U.S. rate.
The Companies Playing Along (And Those Still Holding Out)
The backstory here goes back to July, when Trump sent letters to 17 major pharmaceutical companies with a pretty clear message: get on board or face consequences. The demands included "most-favored-nation" pricing for Medicaid, caps on U.S. launch prices relative to what other high-income countries pay, more domestic reinvestment, and expanded direct-to-consumer sales models.
Five companies have already signed on: Pfizer, Eli Lilly and Co (LLY), AstraZeneca Plc (AZN), Novo Nordisk A/S (NVO), and EMD Serono, the U.S. unit of Merck KGaA (MKGAF) (MKKGY).
The holdouts? That's a who's who of pharmaceutical giants: Sanofi SA (SNY), Regeneron Pharmaceuticals Inc. (REGN), Merck & Co Inc. (MRK), Johnson & Johnson (JNJ), AbbVie, Amgen Inc. (AMGN), Gilead Sciences Inc. (GILD), Boehringer Ingelheim, Bristol Myers Squibb & Co (BMY), GSK Plc (GSK), Novartis AG (NVS), and Genentech, the U.S. arm of Roche Holdings AG (RHHBY).
But that list is about to get shorter. Bloomberg reported Tuesday that both Novartis and Roche are close to finalizing deals that could be announced as soon as Friday, with additional companies potentially joining them.
Why U.S. Drug Prices Are So Much Higher
The fundamental issue Trump keeps hammering on is the massive price gap between what Americans pay for prescription drugs versus what people in other developed countries pay for the exact same medications. In countries with government-run or heavily regulated health systems, prices are negotiated before drugs even reach the market. The government essentially says, "Here's what we'll pay, take it or leave it."
The U.S. system works differently, with less centralized negotiation and more market-driven pricing, which typically means higher costs for consumers. Trump's "most-favored-nation" approach would essentially import the lower prices other countries have negotiated.
The Swiss Connection
There's an interesting geopolitical angle here involving Switzerland, home to both Novartis and Roche. Last month, Switzerland secured a preliminary trade deal that slashed tariffs on several exports, including watches, from 39% down to 15%. That was significant because Switzerland had been hit with the steepest tariff rate imposed on any developed country.
Pharmaceuticals were exempt from those tariffs, but the administration had been making noise about potentially imposing duties in the future. The timing of these drug pricing agreements suggests they could further ease trade tensions between the two countries. Novartis confirmed to Bloomberg that it's in discussions with the administration focused on reducing U.S. drug costs while addressing the pricing disparities between America and other wealthy markets.
In other words, these companies may be reading the room and deciding that agreeing to some price concessions now is preferable to facing potential tariffs or other regulatory headaches down the road.
What Happens Next
Friday's expected announcement will be a key test of whether Trump's pressure campaign is actually moving the needle on drug prices. With half of the 17 targeted companies potentially on board, the administration can claim momentum. But the details matter: which drugs will see price cuts, how substantial will those cuts be, and what exactly are companies committing to in terms of domestic investment and pricing reforms?
The pilot program linking Medicare payments to international prices could be even more consequential in the long run, depending on how it's structured and whether it eventually expands beyond the pilot phase. That's the kind of systemic change that could actually bend the cost curve, not just create a few headline-grabbing price reductions on select medications.
Price Action: Novartis shares were up 0.34% at $135.49, and AbbVie shares were up 0.36% at $225.11 at the time of publication on Thursday, according to market data.
