Healthy Returns: Medicaid cuts in Trump’s megabill may affect some drugmakers more than others

A version of this article first appeared in CNBC’s Healthy Returns newsletter, which brings the latest health-care news straight to your inbox. Subscribe here to receive future editions.

We’re back from the holiday weekend with President Donald Trump’s “big beautiful” bill officially signed into law.

His landmark tax cut and spending package includes more than $1 trillion cuts to Medicaid, which will leave millions of vulnerable Americans without health insurance and threaten the hospitals and centers that provide care to them. While the health-care spending reductions will have massive human costs, they will also affect the pharmaceutical industry.

Medicaid only accounts for a portion of many drugmakers’ revenue in the U.S. – and an even smaller share of their total revenue worldwide. Medicaid also reimburses companies for drugs at lower rates than those in other programs like Medicare or commercial insurance, according to a Monday note from Leerink Partners analyst David Risinger. 

That’s largely due to a program that requires drug manufacturers to provide rebates to states in exchange for Medicaid coverage of their drugs, resulting in lower net drug prices. 

Still, Risinger said “future loss of revenue is a marginal negative” for drugmakers. 

He also said some companies’ sales are more exposed to the Medicaid market than others, based on previous company commentary and his firm’s internal estimates. 

Vertex Pharmaceuticals and Gilead rely more on Medicaid than other large-cap pharmaceutical companies, Risinger said. Medicaid accounts for 25% of Vertex’s U.S. revenue and 22% of Gilead’s domestic sales, according to the note. 

Vertex disclosed at a conference in June that Medicaid accounts for 23% of sales from its cystic fibrosis medicines, which are the company’s key revenue drivers. That tracks: Half of all children and a third of all adults with that genetic condition rely on Medicaid to afford the treatments and care they need to live a healthy life, according to the Cystic Fibrosis Foundation. 

Medicaid also plays a large role in HIV prevention and treatment, especially for underserved populations, which is a core focus for Gilead. For example, the company’s HIV treatment pill Biktarvy was ranked the second-highest in terms of total Medicaid drug spending in 2022, and was still one the most widely used drugs in the program in 2024, according to a note from Jefferies analysts in March. 

Still, the analysts said the hit Gilead’s business will likely take from Medicaid cuts would be “manageable.” The note was based on estimates from a previous version of the bill. 

Commercial insurers also provide the majority of coverage for HIV prevention and ongoing treatment, while Medicaid plays a smaller, though still important, role.

Medicaid represents 15% of Roche‘s U.S. revenue, 12% of Johnson & Johnson‘s domestic sales (excluding its medical device business) and 12% of Novo Nordisk‘s U.S. revenue. Among major pharmaceutical companies, Bristol Myers Squibb and Pfizer had the lowest exposure, with just 4% of their U.S. revenues coming from Medicaid, each.

Risinger noted that significant Medicaid cuts will not occur until after the November 2026 midterm elections, so any financial impacts to drugmakers will essentially begin in 2027. 

There’s also one more important win for drugmakers in Trump’s bill to take into account: a provision that will exempt more medicines from the Inflation Reduction Act’s Medicare drug price negotiations. 

We’ll continue to monitor the impact of legislation on the industry, so stay tuned. 

Feel free to send any tips, suggestions, story ideas and data to Annika at [email protected].

We’re halfway through 2025, which means we have some fresh digital health funding data to review. Even in a volatile macroeconomic and policy environment, the sector saw “strong momentum,” according to a new report from Rock Health.

Digital health companies in the U.S. received $6.4 billion in funding in the first half of the year, up from $6 billion in the same period last year and $6.2 billion in the first half of 2023, the report said. The sector raised $3.4 billion in venture funding in the second quarter alone, up substantially from the average of $2.6 billion per quarter since 2023. 

Startups that use artificial intelligence as a core part of their product raised 62% of all digital health venture funding during the first half of the year, the first time that AI-enabled companies have captured a majority of the fresh capital. These businesses pulled in an average of $34.4 million per round. 

“Digital health is proving it is more than just steady and resilient; the sector is entering a new phase of traction and impact, with AI playing a linchpin role,” Rock Health said.

But while funding is up, deal count is down slightly. Digital health companies closed 245 deals in the first half of the year, while they closed 273 in the same period last year, the report said. Even so, megadeals, or raises above $100 million, are rising. There were 11 megadeals in the first half of the year, which is on pace to pass the 17 megadeals that took place in all of 2024. 

There has also been a flurry of M&A activity within digital health this year. The sector closed 107 M&A agreements in the first half of 2025, which could quickly top the 121 total M&A deals that closed in 2024. 

And, much to the relief of many digital health investors, Hinge Health and Omada Health took the leap and debuted on the public markets. Rock Health said these exits were undeniably “the breakout moments of 2025 so far.”

“These public market debuts have given investors much-needed redemption after an exit drought, tough public market performances, and a string of recent take-privates,” Rock Health said.

Read the full report here. 

Feel free to send any tips, suggestions, story ideas and data to Ashley at [email protected].