Pfizer just flipped the script on drug prices—now Eli Lilly and Amgen are ripping. Is this the start of a new pharma bull run?

Pfizer Inc. (NYSE: PFE) sent a shockwave through global healthcare markets this week after striking a deal with the U.S. government on prescription drug pricing that immediately sparked a “relief rally” across pharmaceutical stocks. Pfizer shares jumped more than 6% in New York trading on Wednesday, while Eli Lilly and Company (NYSE: LLY) and Amgen Inc. (NASDAQ: AMGN) surged between 6% and 8%, as investors welcomed a temporary removal of tariff threats and regulatory uncertainty that had hung over the sector for much of 2025.

The agreement provides Pfizer with a three-year exemption from proposed branded-drug import tariffs in exchange for offering “most-favored-nation” style pricing for Medicaid and committing to new U.S. manufacturing and R&D investments. For Wall Street, this deal represented the difference between an unpredictable hammer and a manageable handshake.

Why did Eli Lilly and Amgen react so strongly to Pfizer’s U.S. deal, and what does this mean for the broader pharma rally?

The sharp moves in Eli Lilly and Amgen stock prices were not only about Pfizer’s own upside. For months, investors feared a worst-case scenario: sweeping, blunt policy measures that could compress margins across the board. By taking a negotiated route with Medicaid rather than launching immediate Medicare or commercial payer reforms, the U.S. government provided investors with a roadmap that feels incremental and predictable.

Eli Lilly, with its powerful diabetes and obesity franchise anchored by GLP-1 therapies such as Mounjaro and Zepbound, had been at the center of policy debate given its reliance on U.S. pricing power. Amgen, meanwhile, had faced skepticism about how well it could defend its legacy drugs and scale new oncology assets in an uncertain regulatory climate. With the deal in place, both companies saw risk premiums come down, prompting fast-money shorts to cover and longer-term investors to reposition for pipeline-driven growth.

What is in the Pfizer agreement that soothed markets, and how does the tariff reprieve alter investor calculus?

The crux of the deal is that Pfizer will align Medicaid drug pricing with benchmarks in peer markets such as Europe and Japan starting in 2026. Medicaid already benefits from steep discounts, meaning the incremental hit to Pfizer’s revenue is contained. In return, Pfizer has secured a three-year exemption from sweeping import tariffs that had been floated by the White House.

The agreement also commits Pfizer to investing heavily in U.S. domestic production facilities and research centers, part of a broader industrial policy that the Trump administration has emphasized. This structure reassures investors that, while drug companies may face concessions, they will at least know the rules in advance and can plan accordingly. For Wall Street, certainty often matters more than the absolute numbers.

Is this rally driven by fundamentals or mostly by relief, and what does it mean for earnings from 2026 onward?

Much of the rally was about the removal of tail risk rather than a new surge in fundamentals. Analysts have pointed out that the pricing concessions under Medicaid will have some modest drag on Pfizer’s U.S. revenues but are unlikely to meaningfully dent its cash flows. For Eli Lilly and Amgen, the effect is more psychological and sector-wide: if Pfizer can negotiate a deal that avoids the most draconian outcomes, then their future agreements may follow a similar pattern.

That said, the new commitments to onshoring are not costless. Building and retrofitting facilities in the U.S. will require billions in capital expenditure, and investors will want to see whether those investments can yield margin expansion or improved supply resilience. The “relief” rally should therefore be seen as repricing of downside, not yet a guaranteed new growth leg.

Does this agreement end the drug pricing threat, or could new rules on Medicare and private payers reignite volatility?

The White House has described Pfizer’s pact as a “first step,” suggesting similar arrangements could be sought with other manufacturers. That means investors should expect further headlines as Eli Lilly, Amgen, and other drugmakers are invited to the negotiating table.

Critically, the deal only covers Medicaid, which represents a relatively small slice of the U.S. pharmaceutical market. Medicare, commercial insurers, and pharmacy benefit managers remain outside the scope. Any new policies targeting those segments could easily swing sentiment again. For now, however, the sector has moved from bracing for a hammer to expecting an incremental approach.

How did healthcare ETFs and broader market sentiment confirm the relief rally, and what do flows suggest?

Trading dynamics showed that the rally was not limited to a handful of large-cap stocks. The Health Care Select Sector SPDR Fund gained more than 2%, while the SPDR Biotech ETF added about 1.7%, confirming breadth across the space. Pfizer, Eli Lilly, and Amgen all traded at volumes far above recent averages, with closing auction imbalances leaning toward the buy side.

While granular fund flow data is not yet available, price action indicates that hedge funds covering shorts were joined by long-only institutions repositioning portfolios into healthcare. With broader equity markets still unsettled by fiscal wrangling in Washington and global macro jitters, healthcare’s defensive and cash-generative qualities made it a natural rotation target once policy clarity emerged.

What does this mean for Eli Lilly, Amgen, and Pfizer’s investor outlook, and how are buy/sell/hold calls shifting?

For Eli Lilly and Company, sentiment remains strongly positive. The obesity and diabetes franchise continues to support multi-year earnings growth, and Wednesday’s rally suggests investors are once again willing to pay for pipeline visibility without discounting for an immediate pricing shock. Analysts describe Eli Lilly stock as a “buy on dips” candidate, given both its innovation pipeline and now reduced policy risk.

For Amgen, investor sentiment is shifting from cautious to constructive. The company’s legacy franchises remain under pressure, but with the tariff threat delayed, investors can focus on oncology pipeline progress and business development. Current analyst consensus leans toward a “hold-to-accumulate” view until catalysts provide stronger conviction.

For Pfizer, the deal is both a short-term win and a medium-term challenge. Tariff clarity provides breathing room, but the market will demand proof that onshoring and direct-to-consumer platforms such as TrumpRx can deliver strategic advantages. Analysts remain split, with some calling Pfizer undervalued on a P/E basis, while others warn that the concessions may weigh on U.S. margins.

What should investors watch next to judge whether this pharma rally can sustain into 2026?

The first test is whether other companies sign similar deals. If Eli Lilly or Amgen agree to Medicaid pricing adjustments in exchange for tariff exemptions or other concessions, the market may see another leg higher. The second test is execution: Pfizer will need to demonstrate that its U.S. investments are tangible and not just political optics. Finally, the broader policy environment remains fluid. Any new push on Medicare or pharmacy benefit managers could revive volatility.

For now, the practical takeaway is clear. Wall Street has re-priced healthcare stocks to reflect a more measured policy environment. The sector that had been punished on political fears is once again trading on fundamentals and innovation.