Donald Trump is hitting the pharmaceutical sector hard! While markets are celebrating the trade truce with China, the American president announces a shock decree aimed at reducing drug prices in the United States by up to 59%. This measure, which would align American prices with the lowest in the world, is causing a stock market earthquake: Sanofi is down 2%, while some Asian laboratories are plummeting by 11%. Americans currently pay 2.5 times more for their treatments than the French. This revolution directly threatens the economic model of the global pharmaceutical industry.

This initiative is part of a context where Americans pay on average 2.5 times more for their medications than the French, according to one Rand Corporation study. A gap that Donald Trump wants to reduce, even if it means disrupting the finances of one of the strongest industries in the world.

The effect was immediately felt on the markets. While most of the CAC 40 stocks benefited from the trade agreement between Washington and Beijing, Sanofi shares lost more than 2% Monday morningThe French giant is not alone in this situation.

Impact of Trump's announcement on laboratory stock prices:

• Novo Nordisk (Denmark): -8,6%
• Roche (Switzerland): -4,5%
• GSK (United Kingdom): -3,5%
• Samsung Biologics and other Asian laboratories: up to -11%
• Pfizer (United States): +2,4%
• Johnson & Johnson (United States): -0,6%

On his network Truth Social, with his usual style of mixing capital letters and exclamation points, Donald Trump promised a reduction "59% MORE!» prices of drugs sold in the United States. The signing of the decree was announced for the same day, showing the president's desire to act quickly without giving laboratories time to organize themselves.

The system Trump envisions is simple in theory: the United States would pay no more for its drugs than the country with the lowest prices in the world. An approach he calls the policy of "most favored nation" Several questions remain unanswered: Will it only apply to Medicare and Medicaid? Will it affect all drugs or only certain categories? This uncertainty is keeping the markets on alert.

For Sanofi, this announcement comes at a delicate time, as the French group had oriented its strategy towards innovative medicines. The American market constitutes a significant part of the revenues of European laboratories, which generally sell their products more expensively in the United States than in Europe. This price difference, considered normal by investors, is now threatened by Donald Trump's initiative.

American laboratories seem to be holding up better than their European and Asian counterparts. On Wall Street, Pfizer gained 2,4% while Johnson & Johnson lost 0,6%. This improved performance could be explained by a more precise understanding of American legal limits, which could restrict the application of the decree. All analysts agree on one point: this measure, if successful, will profoundly change the sector.

According to Bloomberg et CNBC, the Trump administration would first target drugs with "the greatest disparities" in price between the United States and the rest of the world. This category includes anti-obesity treatments from the GLP-1 antidiabetic family, such as Ozempic and Wegovy from Novo Nordisk. These products, which have become popular, generate billions of dollars at prices considered too high by many observers.

Evan Seigerman, head of healthcare research at BMO Capital Markets, recalls:

«The government has no power to set prices in the commercial market».

This constitutional limitation could reduce the scope of the decree. Any attempt to extend this measure beyond government programs would likely meet with the opposition of Congress, whose support would be necessary for more extensive legislation.

The PhRMA (Pharmaceutical Research and Manufacturers of America) lobby reacted quickly. In a statement, it stated that:

«Government price-fixing, in any form, is bad for American patients».

The organization instead suggests:

«address the growing share of costs that go to intermediaries in the system».

This response demonstrates the industry's willingness to defend its business model, even in the face of the White House.

This is not Donald Trump's first attempt. During his first term, a similar initiative was struck down by a federal court., with the laboratories arguing that the administration had not followed the legal procedure. However, the president this time seems determined to overcome any opposition. He has also suggested that he will ignore the challenges, despite significant donations from certain large groups for his inauguration.

Although the decree can legally only apply to government programs, the impact could be significant. Medicare (for people over 65) and Medicaid (for low-income citizens) together account for about 40% of all drug sales in the United States. Stephen Barker, an analyst at Jefferies, describes the potential impact on laboratory revenues as "enormous".

The price difference that Trump wants to reduce is very real. According to a Rand Corporation study, Americans pay on average 2,5 times more for their prescription drugs than the French. This situation explains why the United States, with less than 5% of the world's population, accounts for nearly half of the pharmaceutical industry's revenue. Changing this system would profoundly affect the sector.

In the coming weeks, several elements will be decisive. Observers are awaiting the official announcement of the decree and its precise details. Laboratories will likely initiate legal action, while The reaction of the US Congress will be closely monitored Financial markets will assess the impact on the laboratories' share prices, while large pharmaceutical groups will prepare their responses to this change.

The main argument of the laboratories to justify the high prices in the United States is research fundingThey argue that the margins made in the US market are necessary to invest in the discovery of new treatments. A significant drop in prices could therefore, according to them, slow down medical innovation. This argument, although contested by some economists, remains at the heart of the debate on the regulation of drug prices.

source: Money Radar