Following AstraZeneca PLC's (LSE:AZN, NASDAQ:AZN) agreement with the US government on 'most favoured nation' drug pricing at the end of last week, analysts said the discounts were not as big as some were expecting but will still hit profits.
The White House announced the deal on Friday, after markets closed in New York, with confirmation of the deal shared with investors on Monday.
Analysts at AJ Bell said the deal "is bad for its profit margins", but should put the company in President Trump’s good books, "which could result in a quiet life".
They suggested that, overall, the deal means AstraZeneca’s board -- and therefore investors too -- should be less distracted by political issues going forward.
UBS analysts talked to the company over the weekend and found that MFN prices will be provided on the majority of its portfolio in the Medicaid system, though full details are confidential.
"We understand Medicaid represents less than 5% of US sales at AstraZeneca," UBS said, with the deal expected to cover biopharma and oncology medicines.
"It is unclear to us if rare disease drugs will be included, especially given the recent steps in President Trump's Big Beautiful Bill to expand orphan drug protections in the US."
MFN pricing will be calculated using a basket of pricing from countries including the UK, Canada, Denmark, France, Germany, Italy and Japan, which is more limited than originally proposed by President Trump and "we believe should lead to a modestly-higher MFN price".
"It is unclear to us if the calculation will take the absolute lowest price or whether a GDP-adjusted lowest price will be used, which could further mitigate the price differential with the US."
UBS's previous biggest concern was about how providing discounts in Medicaid had the potential to "bleed across" to commercial drug pricing via the 340B discount program, which allows accredited institutions to access drugs for all patients at Medicaid prices as a safety-net for hospitals but has been criticised by the drug industry as an area of over-use.
"Notably AstraZeneca highlighted that additional MFN discounts in Medicaid will not be achieved through lower direct Medicaid prices, but as confidential state-based supplemental rebate agreements.
"The company believes that this will ensure MFN savings accrue to the State Medicaid programs but are ring-fenced from 340B."
In return for the medicine discounts, a commitment to forward-looking MFN pricing on new drug launches in biopharma and oncology, a commitment to try and persuade other governments to pay more for medicines, and a previously announced $50 billion investment in US manufacturing, AZ will be given a three-year pause in pharmaceutical tariffs.