In a major announcement on September 30, 2025, former President Donald Trump and pharmaceutical giant Pfizer revealed a sweeping deal aimed at lowering prescription drug costs in the U.S. while reshaping the industry’s incentives toward domestic manufacturing.
Under the agreement, Pfizer will cut prices on a large portion of its drugs sold through Medicaid by tying U.S. prices to rates charged in other developed countries, implementing a “most-favored nation” (MFN) pricing model. Some key therapies—including Xeljanz for rheumatoid arthritis, Eucrisa for dermatitis, Zavzpret for migraine, and Duavee for post-menopausal osteoporosis—are slated for steep discounts averaging 50%, with certain products reduced by as much as 85%.
In return, Pfizer will gain a three-year exemption from new tariffs on branded pharmaceuticals, provided it invests heavily in U.S.-based research, development, and manufacturing. The company has pledged to deploy roughly $70 billion toward strengthening its domestic infrastructure.
The broader context is Trump’s earlier threat to impose a 100% tariff on imported branded or patented pharmaceuticals starting October 1, unless manufacturers committed to U.S. production. Pfizer’s deal secures it a grace period under that tariff plan. The market reaction was swift, with shares of Pfizer, Eli Lilly, Merck, Amgen, and other major drugmakers rising between 2% and 7%, as investors welcomed clarity on tariff exposure and pricing policy. Trump indicated that more pharmaceutical companies are expected to announce similar deals soon.
However, several questions remain. Critics point out that the new MFN pricing applies only to Medicaid, not to Medicare or commercial insurance, limiting the benefit for many patients. Others note that Medicaid already receives steep rebates, so the incremental cost to Pfizer may be modest. Implementation details—such as which drugs qualify, how global comparators will be calculated, and how uninsured patients will be affected—are still being finalized.
Trump’s administration has also been in discussions with drugmakers about raising medicine prices abroad to balance out U.S. price cuts. Some countries, including the UK, may face steep tariffs unless they strike acceptable trade agreements with Washington. The ripple effect is already being felt in India, where the pharma sector, heavily dependent on exports, has come under pressure amid new U.S. tariffs on branded drugs.
Overall, the Trump-Pfizer deal represents a high-stakes attempt to reset the U.S. drug pricing model, with far-reaching implications for patients, global markets, and the future of pharmaceutical innovation.