Pfizer-Trump deal blindsides other drug companies

Driving the news: Pharmaceutical lobbyists said the agreement was more far-reaching than they expected and would put pressure on other companies to reach similar terms on international pricing parity and other issues.

• President Trump said that he expects other companies to individually make deals in the coming weeks, naming Eli Lilly as one possible company.
• He raised the threat of additional tariffs on companies that do not come to the table.

Between the lines: "The interesting element to me is how many companies sort of knew something was going on but refused to allow themselves to believe a deal would get cut," said one source familiar with the negotiations between drug companies and the administration.

• "Many of them are questioning whether they need to be or should have been more aggressive in dealing with the administration. And by aggressive I mean aggressive in coming to a deal."
• Bourla is also the board chair of PhRMA, the industry's top trade group. The fact his company was first to cut a deal has put other member companies in an awkward position after PhRMA for months pushed back against Trump's plan.
• PhRMA CEO Steve Ubl noted in a statement that "each company makes its own decision" on pricing, but did criticize the pact announced Tuesday for not "do[ing] enough to address the real drivers of higher prices in the U.S.," such as PBMs and hospital markups.
• Ubl also warned most-favored-nation pricing would harm innovation.

The big picture: The drug industry still could stave off new pricing regulations if enough companies opt to cut deals with the White House.

• Pfizer's stock rose 6.8% Tuesday, with other large drugmakers seeing similar increases. Bourla mentioned how the deal reduced uncertainty both about pricing and the possibility of tariffs.

What's inside: Under Tuesday's agreement, Pfizer agreed not to launch new drugs at a higher price in the U.S. than in other wealthy countries, though there is no cap on that launch price overall.

• It also agreed to sell drugs to Medicaid at most-favored-nation prices, and to sell drugs at a discount on a direct-to-consumer TrumpRx website for people paying with cash without insurance.
• But "specific terms of the agreement remain confidential," according to the company's announcement.

• Pfizer may have been more willing to deal than some other manufacturers, since it faces patent expirations on some of its top-selling drugs and billions in projected revenue losses in the next three years.

Yes, but: There are still important limits to the deal. It is not focused on existing drugs for people on Medicare or commercial insurance.

• Medicaid already pays very low prices for prescription drugs, and many people can't afford to directly purchase drugs without using insurance.
• Raymond James analyst Chris Meekins wrote the deal could also lead to higher U.S. launch prices if European countries, who'd potentially be charged higher prices under Trump's plan, delay product launches there. That could prompt drugmakers to offset those delays by raising U.S. prices.
• Most-favored-nation pricing within Medicaid is "immaterial" for Pfizer as the program represents less than 5% of U.S. sales, a Leerink Partners analyst note on the deal concludes.

What we're watching: Trump has made clear he'd rather drug companies voluntarily lower drug prices than force them to do so through regulation, which experts say would be on shaky legal ground anyway.

• But Tuesday's announcement didn't address what would happen to the administration's lingering threat to impose most-favored-nation pricing through regulation, which if successful could cost manufacturers billions.
• After being name-checked by Trump as a possible future dealmaker, an Eli Lilly spokesperson said the company is in "active discussions with the administration," and would have an update "soon."