Pfizer Inc's (NYSE:PFE) deal with Washington isn't just a handshake in the Oval Office — it's a seismic jolt to America's drug-pricing game. By agreeing to sell medicines on the government's new TrumpRx platform at steep discounts and extend "most favored nation" (MFN) pricing to Medicaid, Pfizer bought itself a three-year tariff reprieve and plenty of goodwill. But the ripple effects could redraw the profit map for insurers, pharmacies, and rival drugmakers.
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Now, three household names — UnitedHealth Group Inc (NYSE:UNH), Eli Lilly And Co (NYSE:LLY), and CVS Health Corp (NYSE:CVS) — suddenly find themselves center stage.
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UnitedHealth: The PBM Party Could Be Over
UnitedHealth's Optum Rx makes money on the "spread" — the difference between the list price and the net price after rebates. But what happens if TrumpRx and MFN pricing collapse that spread?
Fewer rebates mean thinner margins, and investors know PBM economics are already under fire in Washington. For UnitedHealth, lower drug costs may sound suitable for patients — but for Optum's bottom line, the math looks less cheerful.
Eli Lilly: A Template Wrapped In A Warning
Pfizer may have just handed Eli Lilly a playbook: cut a deal with Washington, keep tariffs at bay, and earn political cover. Lilly's blockbuster weight-loss drugs are already under the microscope — and TrumpRx could eventually pressure their U.S. pricing power.
In the short term, Lilly appears to be a winner; in the long term, it may be negotiating from a position of weakness if "most favored nation" pricing becomes widespread.
CVS: Retail Giant Meets a New Competitor
CVS isn't just a drugstore — it's a PBM powerhouse through Caremark. TrumpRx threatens both sides of the business. Manufacturer-to-patient fulfillment eats into retail volumes, while rebate compression squeezes Caremark's margins.
CVS won't collapse — most prescriptions still move through insurance — but the more drugs Washington funnels through TrumpRx, the more CVS's moat looks like it's springing leaks.
Investor Takeaway
Pfizer's concessions look benign on its own earnings — but for peers, the deal is a red flag. UnitedHealth faces PBM margin risk, Eli Lilly gets a short-term pop with a long-term leash, and CVS may see its retail and PBM dominance chipped away.
Call it "Washington Capital" at work: less worried about EPS, more worried about supply chains and voter optics. For investors, that means one thing — if Uncle Sam is your new competitor, you'd better rethink the trade.
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