Pfizer Just Announced a Massive Deal with TrumpRx. Here's What Investors Need to Know

Key Points

• Pfizer signed a deal with the White House to help Americans pay lower prices for prescription drugs.

• This agreement removes the uncertainty hanging over Pfizer's head related to the Trump administration's policies.

• However, Pfizer will slash its drug prices for many products.

• 10 stocks we like better than Pfizer ›

Pfizer (NYSE: PFE) announced on Tuesday that it had signed an agreement with the White House that will help Americans pay lower prices for prescription drugs and bolster U.S. leadership in biopharmaceutical innovation. The big pharmaceutical company will be involved in a website called "TrumpRx" that will help patients find discount prescription drugs and link them to manufacturers' direct-to-consumer websites.

President Donald Trump and Pfizer CEO Albert Bourla spoke at a press conference to discuss the historic deal. The president said, "The American consumers have been subsidizing research and development for the entire planet. They put all of that on us, and yet they were the beneficiaries, too. So it's been changed." Bourla seemed to agree, stating, "I think today we are turning the tide, and we are reversing an unfair situation."

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What does this mean for anyone who owns or is interested in buying Pfizer stock? Here's what investors need to know.

Image source: Getty Images.

The positives for Pfizer investors

Pfizer and the rest of the biopharmaceutical industry have faced significant uncertainty. This uncertainty is due to the Trump administration's threats of tariffs on pharmaceutical imports and plans to implement most-favored-nation (MFN) drug pricing, whereby patients in the U.S. would pay the same prices that are paid in other developed countries.

Bourla said in Pfizer's press release announcing the deal, "We now have the certainty and stability we need on two critical fronts, tariffs and pricing, that have suppressed the industry's valuations to historic lows." He called the agreement "a win for American patients, a win for American leadership, and a win for Pfizer."

Pfizer won't face any tariffs during a three-year grace period, provided that it invests further in expanding its U.S. manufacturing operations. The company committed to spending an additional $70 billion in the U.S. over the next few years. That's not a worrisome amount, considering that Pfizer's capital expenditures related to U.S. research and development between 2018 and 2024 totaled more than $83 billion.

The negatives for Pfizer investors

The obvious downside for Pfizer is that it must drastically reduce the prices on many of its products. The company said that prices will be cut by an average of 50% for "the large majority" of its primary care treatments, along with some specialty products. The prices for some of Pfizer's products, though, will be slashed by 85%.

Don't expect the deal Pfizer made with the Trump administration to give it a lasting advantage over rivals, either. President Trump hinted that agreements with other drugmakers might be on the way soon.

Overall impact

Investors applauded Pfizer's deal with the federal government, with the big pharma stock jumping roughly 13% since Monday's market close. This reaction seems warranted.

The removal of uncertainty related to tariffs and MFN pricing that was looming over Pfizer's head is huge. While Pfizer said that "specific terms of the agreement remain confidential," the company's price cuts appear to be limited only to Medicaid and on the TrumpRx website for people without health insurance. Overall, the positives of Pfizer's agreement should outweigh the negatives for investors.

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Keith Speights has positions in Pfizer. The Motley Fool has positions in and recommends Pfizer. The Motley Fool has a disclosure policy.