Shares of pharmaceutical giant Eli Lilly (LLY) are down about 3% on media reports that U.S. President Donald Trump plans to sign a new executive order focused on prescription drug prices.
Specifically, President Trump is planning to dramatically lower drug costs by linking the amount the U.S. government pays for various medications to the lower prices that pharmaceutical companies such as Eli Lilly charge in foreign countries abroad.
The Trump administration is reportedly calling the executive order “Most favored nation.” The end goal is to force prices down, especially for drugs covered under the U.S. Medicare program. President Trump announced a similar plan back in 2018, but it failed to gain traction in the wake of resistance from the pharmaceutical lobby.
Price Discrepancies
There can be large price discrepancies for prescription drugs around the world, with Americans widely regarded as paying the highest prices for medications. A 2023 study by the Canadian government, for example, found that consumers in Canada pay, on average, 44% less than neighboring Americans for the same prescription drugs.
In the case of Eli Lilly, its blockbuster weight loss drug Zepound costs around $1,000 for a month’s supply in the U.S. In other countries, Zepbound sells for up to 80% less. President Trump’s efforts to lower medication costs in America is likely to result in less profits for Eli Lilly, a prospect that is pressuring the company’s stock.
Is LLY Stock a Buy?
The stock of Eli Lilly has a consensus Strong Buy recommendation among 19 Wall Street analysts. That rating is based on 18 Buy and one Sell recommendations issued in the last 12 months. The average LLY price target of $981 implies 29.33% upside from current levels.
