Nine Biotechs Join White House Medicaid

Nine mid-sized biopharmaceutical companies have agreed to participate in a White House-led Medicaid pricing model. The agreements, announced on Monday, link U.S. Medicaid drug prices to the lowest charges paid in other countries.

In exchange for joining the program, the manufacturers have been granted exemptions from tariffs under Section 232 of the Trade Expansion Act. The White House and the companies did not disclose the detailed terms of the individual agreements.

The Companies and Their Commitments

The nine drugmakers are Alcon, Astellas Pharma, BeOne Medicines, BridgeBio Pharma, CSL, Kyowa Kirin, Sun Pharma, Teva Pharmaceuticals, and UCB. They will participate in the Centers for Medicare and Medicaid Services' GENEROUS program, which was formed in January and is set to expire in six years. Incyte separately announced a similar deal focused on its blood disease drug Jakafi.

Some manufacturers pledged to align prices for future drugs with these international benchmarks as well. Beyond pricing, several companies announced related commitments. CSL revealed plans to expand a manufacturing facility in Illinois. Astellas, Sun Pharma, Teva, and UCB pledged to donate active pharmaceutical ingredients to a U.S.-based reserve.

Limited Scope and Financial Impact

The deals apply only to Medicaid, the joint federal-state program for low-income individuals. They do not apply to commercial insurance or the much larger Medicare program. According to federal data, Medicare spent $163 billion on prescription drugs in 2024, while Medicaid paid $54 billion for branded drugs that same year.

Analysts suggest the financial impact on the companies will be minimal. In a client note, RBC Capital Markets analyst Brian Abrahams wrote that Medicaid accounts for less than 2% of the sales of BridgeBio's heart disease drug Attruby. BridgeBio stated it does not expect to face any future pricing mandates as a result of the deal.

Abrahams also analyzed the impact on BeOne Medicines. While its lung cancer drug Tevimbra is included in the agreements, it will likely see only a small effect from Medicaid discounting. BeOne secured an exemption for its leukemia and lymphoma drug Brukinsa, which has more sales in Medicare.

Analyst Perspective on Market Impact

RBC's Brian Abrahams does not foresee any of the nine companies "sustaining any meaningful commercial impact" from the agreements. He added that there could be "incremental upside" for their shares because the threat of immediate price controls appears to have diminished.

The existing structure of Medicaid already mandates significant discounts for drugs under a 1990 law. This makes the additional price reductions achieved through Monday's agreements unclear. The model links Medicaid prices to the lowest rates paid by other developed nations.

For context, the following table compares the reported annual drug spending for the two major U.S. government health programs in 2024:

The GENEROUS program is scheduled to run for six years.