Investing.com -- Bernstein analysts say the market has overreacted to President Trump’s latest executive order on drug pricing, arguing that the directive poses limited new risks to pharmacy benefit managers (PBMs) despite a sharp selloff in the sector.

In a note to clients, Bernstein wrote, “We see the reaction to PBM stocks as off target,” after shares of CVS and Cigna (NYSE:CI) fell following Trump’s announcement.

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The order, signed Monday, mandates that pharmaceutical companies offer U.S. patients the lowest prices available in “Most Favored Nation” countries, with price targets to be set by the Department of Health and Human Services within 30 days.

At a press conference, Trump said the goal is to “bring down the prices by 59% to 90%” and threatened to bypass pharmaceutical companies that don’t comply: “Big Pharma will either abide by this principle voluntarily or we will use the power of the federal government.”

While Trump also promised to “cut out the middlemen” by allowing direct sales of drugs at reduced prices, Bernstein noted this development is “already happening in limited circumstances (e.g. LillyDirect)” and is not a “meaningful change to outlook for drug stores or PBMs.”

Bernstein emphasized that the order marks a shift in political focus back toward pharmaceutical companies after PBMs had been in the spotlight.

“This exec order is focuses on the America First aspect of drug pricing,” they wrote, adding that any major impact would likely require legislation, as executive action alone may face legal challenges.

Although PBM revenue streams could be affected by potential list price reductions, Bernstein concluded, “We do not see this order as a new impact to PBMs.”

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