Pharma Giants Cut Drug Prices in Deal with Trump for Tariff Relief
Merck, Gilead, and others accept significant discounts on key medicines in exchange for tariff exemptions and regulatory clarity, boosting US manufacturing.
Major pharmaceutical manufacturers including Merck and Gilead Sciences have finalized agreements with the Trump administration to dramatically lower the prices of key drugs for American patients, locking in regulatory certainty in exchange for billions of dollars in US investment and relief from punitive tariffs.
In a series of deals announced on December 19, nine drugmakers joined an administration initiative aimed at aligning US drug costs with the lowest prices paid among developed nations. The news, which provides a clear path forward on pricing policy, was met with a favorable reception from investors who have long been wary of regulatory risk. Shares of Merck & Co. (NYSE: MRK) rose slightly to $101.09, while Eli Lilly (NYSE: LLY), which secured a similar deal in November, saw its stock climb 1.4% to $1,071.44 in afternoon trading.
Under the terms of its agreement, Merck committed to offering its widely used diabetes treatments Januvia and Janumet at a roughly 70% discount to some patients. In return, the company will gain a three-year exemption from Section 232 tariffs and has pledged to invest over $70 billion in U.S. capital expenditures and research and development.
Similarly, Gilead Sciences announced a three-year agreement that provides discounts for Medicaid on select medicines for HIV, Hepatitis C, and COVID-19. The company will also offer its Hepatitis C treatment, Epclusa, at a reduced cash price through a new direct-to-patient platform.
These agreements follow a path forged in November by Eli Lilly and Novo Nordisk, whose blockbuster obesity and diabetes drugs became a focal point of the pricing debate. In their deals, the companies agreed to slash the monthly cost of popular GLP-1 medicines like Ozempic, Wegovy, and Zepbound from over $1,000 to the $350 range. With a market capitalization approaching $1 trillion, Eli Lilly's participation signaled a major strategic shift for the industry.
While the steep discounts present a headwind to revenue, the market's positive reaction indicates that investors place a higher value on routing regulatory and trade uncertainty. For years, the pharmaceutical sector has faced political pressure over high costs and the threat of broad, unilateral tariffs on imported materials. These agreements, negotiated under a "Most Favored Nation" framework, effectively trade lower prices on specific high-cost drugs for operational stability and protection from tariffs on active pharmaceutical ingredients (APIs) and other components.
"The deals provide a playbook for the industry in navigating the political landscape," noted one analyst. "Companies are accepting a surgical hit on revenue for a massive reduction in systemic risk. The tariff exemptions alone are a significant financial incentive."
The agreements are also a cornerstone of an industrial policy aimed at boosting domestic manufacturing. By tying price guarantees to commitments for U.S.-based investment, the administration is leveraging the government's purchasing power to re-shore critical supply chains. According to a White House fact sheet, the deals represent a landmark development in making drugs more affordable while securing the nation's pharmaceutical base.
Looking forward, the arrangements set a precedent for future negotiations and could serve as a model for other drugmakers. While the immediate financial impact involves lower revenue per prescription for the discounted drugs, the long-term benefit of a stable and predictable pricing environment in the world's largest healthcare market appears to be a trade that Wall Street is willing to endorse.