Shares of pharmaceutical giant Eli Lilly (LLY) were trading erratically after U.S. President Donald Trump signed an executive order aimed at lowering prescription drug prices in America.
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The executive order links the amount the U.S. government pays for various medications to lower prices that pharmaceutical companies such as Eli Lilly charge in foreign countries. The Trump administration is calling the executive order “Most favored nation.”
The order aims to cut the prices American consumers pay for prescription drugs, especially those covered under the U.S. Medicare program. The executive order revives a similar plan that President Trump tried to implement in 2018, but it failed in the wake of strong resistance from the pharmaceutical lobby.
LLY stock had been surging higher on May 12 along with a broader rally across the entire market on news of lower import tariffs between the U.S. and China. However, the stock pared those gains to about 2% on news that Trump signed the executive order on prescription drug prices. Eli Lilly’s stock is down about 2% on the year.
Drug Costs
There can be large price discrepancies for prescription drugs around the world, with Americans often paying the highest prices for medications. President Trump’s move to lower medication costs is likely to result in less profits for Eli Lilly.
Eli Lilly’s blockbuster weight loss drug Zepound costs around $1,000 for a month’s supply in the U.S. In other countries, Zepbound can sell for up to 80% less. President Trump claimed at a news conference that U.S. drug prices may fall as much as 90% because of his new executive order.
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 $980.69 implies 30.19% upside from current levels.
