Biotech and pharmaceutical stocks rose after the November election, reflecting investor optimism that a Trump presidency would mean less focus on drug prices.
Not so fast, President-elect Trump said in his interview for Time magazine’s “Person of the Year.”
“I’m going to bring down drug prices,” Trump told Time during an interview in his dining room after the election. “I don’t like what has happened with drug prices.”
Trump didn’t elaborate on what hewould do to lower drug prices, and his transition team did not respond to requests for more information.
Drug companies and investors could see Trump’s words as a threat. Biotech and pharmaceutical company stocks closed slightly down Wednesday. The S&P Pharmaceuticals Select Industry Index closed down 1.9 percent and the NASDAQ Biotechnology Index closed down 2.9 percent.
Adam Fein, president of Pembroke Consulting, a firm focused on pharmaceutical economics, said that Trump may be sending a signal to the industry.
“Historically, a lot of manufacturers have increased the prices of their products at the beginning of the year,” Fein said. “He may be trying to use his bully pulpit to signal, ‘You should change the system’ — without necessarily saying how he’s going to change the system, or what should be done.”
Drug companies have been under intense scrutiny from lawmakers for large price increases after a series of high-profile cases sparked public outrage. Last year, Turing Pharmaceuticals chief executive Martin Shkreli stirred controversy after hiking the price of the drug Daraprim 4,000 percent. And earlier this year, lawmakers called the chief executive of drug company Mylan to a congressional hearing to defend the 500 percent increase on the price of the lifesaving allergy treatment EpiPen over a decade.
Some pharmaceutical executives, believing that the drug price debate isn’t likely to recede, have pressed the industryto get in front of the issue to avoid government intervention. In some cases, companies have taken steps to show they can keep prices in check without federal action.Brent Saunders, chief executive of Allergan, wrote a blog post in September vowing to limit drug prices to single-digit percentage price hikes, once a year. Danish diabetes giant Novo Nordisk followed suit with a similar pledge last week.
“We hear from more and more people living with diabetes about the challenges they face affording healthcare, including the medicines we make,” wrote Jakob Riis, Novo Nordisk’s U.S. president. “This has become a responsibility that needs to be shared among all those involved in healthcare and we’re going to do our part.”
President-elect Trump’s unpredictability has already made companies in multiple industries nervous. Drug companies may refrain from big price hikes simply to stay out of his crosshairs, since the pharmaceutical industry — already under intense scrutiny because of price hikes — could be an easy target.
Fein also noted that Trump may have industry tailwinds — drug companies have increasingly begun to talk publicly about pricing and the warped incentives that exist in the current system.
Drug companies have argued that list prices are fiction. Traditionally, list prices do not reflect what anyone in the system pays for a drug — or what drug companies receive — due to a complex system of payments to middlemen and secret rebates and discounts. But as health plans have shifted toward high-deductible plans or coinsurance, patients are being affected by the list prices of drugs, and drug companies have increasingly begun to acknowledge and focus on the problem.
It’s hard to know whether the Trump administration would support other policy levers to rein in drug prices. But a signal may be in his choice of Tom Price to head the Department of Health and Human Services.
In 2007, Price said that allowing Medicare to negotiate on drug prices, for example, was a “solution in search of a problem,” according to the New York Times.