Trump vs. Big Pharma – Round One

Translation: Original published in Finnish on 5/13/2025 at 9:15 am EEST.

The US presidential administration has initiated measures to lower drug prices. With Monday's executive order, the administration aims to lower drug prices to the level of other developed countries. There are significant question marks regarding the content and implementation of the initiative, and judging by the immediate market reactions, the risk to pharmaceutical companies was considered small in the markets. However, if implemented, we believe that the price cuts would have a major impact on the entire industry, and they would have varying effects on the outlook for pharmaceutical companies listed on the Helsinki Stock Exchange.

Drug prices are the highest in the world in the United States

Drug prices in the United States are clearly – about 2-3 times – higher than in other developed economies. High prices increase the cost-ineffectiveness of healthcare. On the other hand, high prices have brought a significant amount of drug development to the United States, which has supported the country's leading position in the field and guaranteed American patients the newest medicines first in the world. The current US administration has been talking about raising tariffs on medicines and lowering prices for some time now. Yesterday, Monday, we saw the first concrete step towards achieving the goal of lowering prices. Although the Trump tariffs imposed in the spring did not affect medicines, the administration has repeatedly expressed support for pharmaceutical tariffs. The administration's study on the importance of the pharmaceutical industry to national security has been interpreted as preparation for imposing pharmaceutical tariffs.

The administration wants to lower drug prices

President Trump already sought to lower drug prices during his first term. The first attempt was narrower in scope and faced opposition from the pharmaceutical industry and Congress. The initiative was ultimately stopped by a court decision at the end of the presidential term. Now, the President has communicated that he is aiming for price slashes of up to several tens of percent and issued an executive order on Monday regarding price decreases. The order includes several individual measures, and pharmaceutical companies have 180 days to negotiate prices with the Department of Health & Human Services. The intention is to tie prices in the United States to those of other developed economies in a so-called "most favored nation" policy.

At the moment, it is unclear what the order means in practice. The initiative may require the support of Congress, which is uncertain. Moreover, the initiative may be stopped by a court decision, as happened last time. It is also unclear what drugs the order would apply to in practice and what kind of price reductions would be targeted in each case. The market's initial reaction to the news was negative, but pharmaceutical companies' share prices turned upwards during Monday's trading. In other words, the market does not seem to believe in significant negative consequences. However, should a large-scale price reduction of medicines go through, we believe it would have a significant impact on the entire industry. The industry companies' revenue and earnings would be subject to pressure, which could lead to a decrease in R&D costs and, consequently, to slower development of new remedies. The United States is currently clearly the most important pharmaceutical market, and price cuts could affect the geographical priorities of commercialization.

Potential impacts on Helsinki Stock Exchange pharmaceutical companies

Orion – a significant portion of Orion's earnings comes from royalties on the prostate cancer drug Nubeqa in the United States. A price level decrease would thus likely have a direct earnings impact on Orion.

Herantis and Faron – as pharmaceutical development companies in the research stage, a price decrease would not have an immediate impact on the companies' finances. However, changes in market potential would likely affect the companies' outlook, commercialization plans and priorities. There could also be effects on the planned research program and indications.

Modulight – the company aims to commercialize its lasers in combination with photoactivatable drugs for next-generation cancer and eye disease treatments. With commercial treatment solutions still lacking, price cuts would have no immediate impact. Even in the medium and long term, the impact is uncertain, as we do not know the impact of drug prices on the pricing of treatments developed by Modulight. Based on current information, we believe the risk for Modulight is low.