Why Pfizer Stock Just Popped

Key Points

• Pfizer will reduce prices on drugs sold to Medicare patients.

• The Trump administration has made cutting prescription drug prices a priority.

• Ultimately, the administration aims to have Americans paying the same prices for drugs that people in other nations pay.

• 10 stocks we like better than Pfizer ›

Pfizer (NYSE: PFE) stock was trading 3.6% higher as of 12:01 p.m. ET Tuesday after The Washington Post reported that the Trump administration had struck a deal with the pharmaceutical giant under which it will sell some drugs to Medicaid patients at reduced prices.

Image source: Getty Images.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Why would Pfizer cut drug prices?

President Donald Trump signed an executive order in May ordering the government to negotiate new pricing with U.S. drugmakers, such that they charge no more to U.S. customers than they do to patients in other wealthy nations. Step one of the plan that order laid out involves attempting to get drug companies to lower prices voluntarily -- with the implication that step two might involve the government imposing mandatory price cuts.

In remarks last week, Trump complained: "We pay much higher for drugs than the rest of the world. We subsidize the rest of the world [and] we're not doing that anymore."

Pfizer apparently didn't like the sound of that, so it decided to go the voluntary route. In so doing, it both handed Trump a win, which may limit his future criticism of the company, and also retained some control over how far it will reduce prices -- somewhat preserving its profit margins.

So there's upside for Pfizer in Tuesday's news, alongside the obvious downside that charging less for those medications will result in slimmer profit margins.

Is Pfizer stock a buy?

Priced at just 12.6 times trailing earnings and an even cheaper-sounding 10.9 times free cash flow, Pfizer stock looks very cheap if the company can achieve any profit growth at all.

Getting on Trump's good side, and potentially becoming a preferred provider of drugs to Medicaid, could be one way for Pfizer to rev up its growth engine.

Should you invest $1,000 in Pfizer right now?

Before you buy stock in Pfizer, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Pfizer wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $650,607!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,114,716!*

Now, it’s worth noting Stock Advisor’s total average return is 1,068% — a market-crushing outperformance compared to 190% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of September 29, 2025

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer. The Motley Fool has a disclosure policy.