Trump's drug-price crackdown could be more bark than bite

As in negotiations with foreign nations, minor concessions by drug companies are more likely than a true overhaul.

- David Wainer

It is appropriate that Donald Trump chose to unveil his new push to cut drug prices on the same day his administration moved to ease tariffs on China. Investors are betting that the ultimate hit to big pharma could be similarly muted.

As with Trump's trade brinkmanship, victories on drug pricing could be vaguely defined, with deals subject to extended negotiation. That is why, despite the tough talk, now may be an opportune time to invest in the beaten-down sector.

On Monday, President Trump signed an executive order aimed at lowering prescription drug costs, directing his administration to peg U.S. prices to those paid abroad. On the surface, it is an ambitious attempt to rein in America's notoriously high drug spending. Much of his diagnosis was on point—including the claim that Americans subsidize global innovation and his crude but not incorrect jab that "fat shots" like Wegovy cost a fraction in the U.K. of what they do in the U.S.

Yet while Trump's announcement was full of bluster, it lacked policy detail. And in the U.S., the pathways to overhauling drug spending are narrow and mostly run through Congress. That is why President Joe Biden's Inflation Reduction Act, which empowers Medicare to negotiate some prices, went through the legislative route—and why Trump initially tried to advance his "Most Favored Nation" approach through the current tax bill.