By Elsa Ohlen

Shares of global pharmaceutical companies opened lower Tuesday, after President Donald Trump signed a highly-anticipated executive order aimed at lowering drug prices for Americans.

The order was "not as bad as feared," William Blair analysts led by Matt Phipps wrote in a note to clients Monday. Investors appeared to agree: Pharma stocks mostly turned higher after the announcement Monday, after slumping earlier in the day.

But shares of Johnson & Johnson, Merck, AbbVie and Pfizer resumed their decline Tuesday: The stocks were down between 1.1% and 3.3% in early trading Tuesday while Eli Lilly traded largely flat. The S&P 500 was up 0.5%.

The new order directs Health Secretary Robert F. Kennedy Jr. to facilitate patients' buying prescription drugs directly from drugmakers if sold at "the most-favored-nation price." The White House didn't respond to a Barron's request for clarification on Monday.

Trump has vowed to bring down prices of medicines in the U.S. to the lowest one paid for the same treatment in other wealthy countries, or so-called "most-favored-nation" drug pricing. On Monday, the focus of the administration appeared to be removing layers of rebates to pharmacy-benefit managers, as well as increasing prices in other countries, although it isn't immediately clear how that would happen.

It doesn't mean the pharmaceutical sector is out of the woods. There are still plenty of questions about the order, and the risk of high tariffs on pharma imports hasn't gone away.

"There are still significant questions on how this can be implemented, including whether companies can raise prices on already approved drugs with established pricing across developed countries, and if the threat of drug importation from other countries with lower list costs could be accomplished," Phipps said.

The order was "all bark, little bite," RBC Capital Markets analysts led by Brian Abrahams noted. The executive order is unlikely to rattle the sector, even if it lacks the clarity needed to completely remove the most-favored-nation overhang, the analysts added.

The overhanging tariff threat is also a big unknown. Trump has said a "major" tariff on the pharmaceutical industry is coming, and more details could come as soon as this week.

Write to Elsa Ohlen at elsa.ohlen@barrons.com

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May 13, 2025 11:18 ET (15:18 GMT)

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