President Donald Trump recently announced a round of drug-pricing agreements with international pharmaceutical companies and some smaller biotechs in order to make healthcare more affordable for Americans.
The nine companies in the latest agreements are largely foreign-headquartered companies, including Alcon (Switzerland), Astellas (Japan), BeOne (Switzerland), CSL (Australia), Kyowa Kirin (Japan), Sun Pharma (India), Teva (Israel) and UCB (Belgium).
The deals were built on agreements the administration struck with 17 of the world’s largest drugmakers, including Pfizer, Eli Lilly and Amgen, starting last year.
It now brings the total number of companies participating in the administration's Most-Favoured-Nation (MFN) framework to 26, covering about 89% of the branded drug market, according to the White House.
Why Does the Latest Deal Matter?
The expansion of the MFN framework does not eliminate pricing pressure on drugmakers but provides greater clarity on how the administration plans to lower U.S. drug costs. The agreements mainly target Medicaid and certain consumer purchases, leaving many employer-sponsored insurance plans outside their direct scope.
Some drugmakers may also benefit from tariff relief and greater policy certainty, creating a trade-off between lower drug prices that could hurt revenues and potential benefits from tariff relief and increased U.S. manufacturing.
ETFs in Focus
The expansion of Trump's MFN agreements is a mixed development rather than a straightforward positive or negative for healthcare stocks.
Likely Winner - Healthcare Providers
Lower prescription-drug prices can reduce insurers' pharmacy and medical costs, particularly for government-sponsored health insurance plans. If insurers spend less on medications while premiums and reimbursement rates do not fall proportionately, their medical-loss ratios could improve.iShares U.S. Healthcare Providers ETF IHF could benefit in this regard.
However, if drug costs decline materially, policymakers may push for lower insurance premiums or reimbursement rates, transferring part of the savings from insurers to consumers.
Also,note that insurers and pharmacy-benefit managers (PBMs) can benefit from rebates, discounts and negotiated spreads in the pharmaceutical supply chain. If government policy forces list or net drug prices lower, some rebate- and spread-based revenue streams could decline. Some of these PBMs have exposure to the ETF IHF. Hence, we can expect a mixed-to-moderately positive impact on the IHF ETF. IHF has inched up 0.6% over the past week.
Mixed Impact: U.S. Pharma
The U.S. pharma sector has long been accused of price gouging. Hence, the need for MFN agreements is understandable. With the government inking deals with foreign companies in exchange for tariff relief and other benefits, many U.S. pharma companies should not face the direct hit from the latest deal.
Note that U.S. patients currently pay by far the most for prescription medicines, often nearly three times more than in other developed nations, and hence, President Trump has been pressuring drugmakers to reduce their prices to the levels available elsewhere, as quoted on CNBC. In 2025, big U.S. pharma companies like Pfizer, Eli Lilly and Amgen underwent this move. VanEck Pharmaceutical ETF PPH has, however, survived such threats and added 28.3% returns over the past year.
Investors should note that the latest agreements do not mean that every American will pay MFN prices for every prescription. The new agreements specifically give state Medicaid programs access to MFN pricing for participating companies' products.
Therefore, the effect on the broader U.S. pharma market will depend on whether MFN pricing gets included in Employer-sponsored insurance, commercial insurance, all direct-to-consumer purchases and drug launches.
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iShares U.S. Healthcare Providers ETF (IHF): ETF Research Reports
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This article originally published on Zacks Investment Research (zacks.com).