Amgen Strikes Drug Pricing Deal With Trump: What Investors Should Know

Amgen AMGN recently signed a landmark agreement with the Trump administration to lower drug prices in the United States.

Through this deal, Amgen addresses the two major concerns that have plagued Big Pharma this year: drug pricing and tariffs. While the company will align the prices of its marketed drugs with those in other developed countries, it will also extend substantial discounts to American citizens who purchase its products through direct-to-consumer (DTC) channels and on TrumpRx.gov, a federal purchasing platform scheduled to go live next month.

In October, Amgen unveiled the launch of its DTC program called AmgenNow, which started with offering its blockbuster cholesterol-lowering drug Repatha at $239 per month, a nearly 60% discount to its U.S. list price. Alongside the drug-deal announcement, the company also announced that it is expanding access under this program to its migraine drug Aimovig and Humira biosimilar Amjevita, each at $299 per month, a discount of 60% and 80% on their respective U.S. list prices.

While Amgen did not disclose all the financial terms of the agreement, the deal is widely expected to resemble arrangements struck by other drugmakers. In exchange for lowering prices, participating companies have received a three-year exemption from import tariffs on pharmaceutical ingredients, contingent on expanding domestic manufacturing capacity. In this context, AMGN had previously announced plans to invest an additional $2.5 billion this year to strengthen its U.S. production and research capabilities. This includes a $600 million science and innovation center in California, a $900 million manufacturing expansion in Ohio and a $1 billion facility in North Carolina.

Investors Express Optimism Around Pharma Sector

Amgen is not alone in pursuing such agreements. Eight other large-cap drugmakers — Bristol Myers BMY, GSK plc GSK, Merck MRK, Roche Group member Genentech, Gilead Sciences, Novartis, Sanofi and privately-held Boehringer Ingelheim — announced similar deals with the administration.

These companies join Pfizer, AstraZeneca, Eli Lilly, Novo Nordisk and Merck KGaA, which signed comparable agreements with the government over the past few months.

In addition, some of these drugmakers have also agreed to donate active pharmaceutical ingredients (API) for key products to a government stockpile reserve aimed at ensuring American supply chain resilience during emergencies. In this connection, Bristol Myers has agreed to contribute around 6.5 tons of apixaban, the API used in the blood thinner Eliquis. While Merck plans to donate about 3.5 tons of an antibacterial medication called ertapenem, GSK will supply nearly 99 kgs of albuterol API used in many asthma inhalers.

With the latest announcement, the Trump administration has now reached deals with 14 out of 17 large drug manufacturers that were called out in July to lower drug prices in the country. In our opinion, the announcement has improved investor outlook for the overall pharma sector, as it signals a more cooperative stance between the government and Big Pharma.

The remaining three companies — AbbVie, J&J and Regeneron — are yet to sign similar deals and remain in active discussions with the government.

AMGN’s Price Performance, Valuation and Estimates

Shares of Amgen have outperformed the industry year to date, as seen in the chart below.

From a valuation standpoint, Amgen is trading at a discount to the industry. Based on the price/earnings (P/E) ratio, the company’s shares currently trade at 15.34 times forward earnings compared to the industry's average of 17.48. The stock is trading above its five-year mean of 13.75.

EPS estimates for 2025 and 2026 have risen in the past 60 days.

Amgen currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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