US pharma stocks gain up to 5% on Trump's move to slash drug prices

US pharma stocks rallied on Monday in line with broader market gains on the back of US President Donald Trump's announcement that he would sign an executive order on reducing prescription drug and pharmaceutical prices. While Pfizer and Eli Lilly were up just over 2% each, Merck & Co Inc gained nearly 5%.

In contrast, European and Asian drugmakers fell on Monday. Frankfurt-listed shares in Novo Nordisk, AstraZeneca, GSK and Roche Holding were down between 1% and 5%, underperforming a gain in broader European stock index futures.

In Japan, the pharmaceutical sector fell over 4% to become the worst performer among the Tokyo Stock Exchange's 33 industry sub-indexes. Indian pharma stocks were also lower.

The proposed policy by Trump seeks to align US drug prices with the lowest prices paid internationally, a move that has significant implications for the pharmaceutical industry.

The United States pays the highest prices for prescription drugs, often nearly three times more than other developed nations. Trump tried in his first term to bring the United States in line with other countries but was blocked by the courts.

The executive order's emphasis on "most favored nation" pricing could significantly impact the revenue models of pharmaceutical companies, especially those heavily reliant on US sales. For instance, AstraZeneca and GSK, which derive a substantial portion of their revenue from the US market gained 0.3% and 0.6%, respectively.

While the policy aims to make medications more affordable for American consumers, it has raised concerns about potential reductions in research and development investments. The Pharmaceutical Research and Manufacturers of America (PhRMA) warned that such pricing strategies could negatively affect innovation and patient access to new therapies.

Overall, the broader Benchmark S&P 500 hit its highest since early March on Monday as a US-China agreement to slash tariffs put investors at ease after weeks of uncertainty around the future of global trade.

Under the deal with the US, The US will cut extra tariffs it imposed on Chinese imports in April this year to 30% from 145% and Chinese duties on US imports will fall to 10% from 125%, the two countries said on Monday. The new measures are effective for 90 days.