Pharma ETFs in Focus on Trump's Drug Price Overhaul

President Donald Trump announced plans to sign an executive order aimed at significantly reducing U.S. prescription drug prices by 30% to 80%. The initiative, known as the "most favored nation" policy, seeks to align U.S. drug prices with those of the lowest-paying countries globally. 

Trump criticized pharmaceutical companies for charging Americans higher prices, asserting that U.S. consumers often pay three to ten times more for identical drugs compared to patients in other nations. He emphasized that the new pricing structure would not only reduce drug costs domestically but also lead to price increases internationally, aiming to create a more equitable system.

The proposal is expected to face strong pushback once again from drug manufacturers (read: A Look at Pharma ETFs After Strong Q1 Earnings). 

Market Impact

This policy has immediate implications for the pharmaceutical industry and related ETFs. Major pharmaceutical companies like Johnson & Johnson (JNJ), Merck (MRK), Eli Lilly (LLY) and AbbVie (ABBV) saw stock declines following the announcement. Similarly, pharmacy benefit managers such as CVS Health (CVS), Cigna (CI), and UnitedHealth (UNH) saw their shares dip, reflecting concerns over potential revenue impacts.

As such, most pharma ETFs like iShares U.S. Pharmaceuticals ETF IHE, VanEck Vectors Pharmaceutical ETF PPH, Invesco Pharmaceuticals ETF PJP, SPDR S&P Pharmaceuticals ETF XPH and First Trust Nasdaq Pharmaceuticals ETF FTXH are in focus.

iShares U.S. Pharmaceuticals ETF (IHE)

iShares U.S. Pharmaceuticals ETF provides exposure to 37 U.S. companies that manufacture prescription or over-the-counter drugs or vaccines by tracking the Dow Jones U.S. Select Pharmaceuticals Index. iShares U.S. Pharmaceuticals ETF has $552.1 million in AUM and charges 39 bps in fees and expenses. It trades in average daily volume of 161,000 shares and carries a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: Is Healthcare Losing the Status of Safe Haven? ETFs in Focus).

VanEck Vectors Pharmaceutical ETF (PPH)

VanEck Vectors Pharmaceutical ETF follows the MVIS US Listed Pharmaceutical 25 Index and holds 25 stocks in its basket. It has amassed $617.8 million in its asset base and charges 36 bps in annual fees. VanEck Vectors Pharmaceutical ETF trades in an average daily volume of 483,000 shares and has a Zacks ETF Rank #3 with a Medium risk outlook. 

SPDR S&P Pharmaceuticals ETF (XPH)

SPDR S&P Pharmaceuticals ETF provides exposure to pharma companies by tracking the S&P Pharmaceuticals Select Industry Index. With an AUM of $137.3 million, it charges 35 bps in fees a year and trades in an average daily volume of 61,000 shares. It has a Zacks ETF Rank #3 with a High risk outlook.

Invesco Pharmaceuticals ETF (PJP)

Invesco Pharmaceuticals ETF offers exposure to companies that are principally engaged in the research, development, manufacture, sale, or distribution of pharmaceuticals and drugs of all types. It follows the Dynamic Pharmaceuticals Intellidex Index and holds 31 stocks in its basket. Invesco Pharmaceuticals ETF has AUM of about $235.3 million and charges 56 bps in fees and expenses. It trades in an average daily volume of 10,000 shares and has a Zacks ETF Rank #3 with a High risk outlook (see: all the Healthcare ETFs here).

First Trust Nasdaq Pharmaceuticals ETF (FTXH)

First Trust Nasdaq Pharmaceuticals ETF tracks the Nasdaq US Smart Pharmaceuticals Index, holding 50 securities in its basket. It has AUM of $13.7 million and trades in an average daily volume of 15,000 shares. First Trust Nasdaq Pharmaceuticals ETF charges 60 bps in annual fees and has a Zacks ETF Rank #3.

 

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