President-elect Donald Trump took aim at drugmakers on Wednesday by promising in a magazine interview that “I’m going to bring down drug prices,” sending shares of pharmaceutical and biotechnology companies lower. In a cover story for Time magazine, which named him its Person of the Year, Trump said: “I don’t like what has happened with drug prices.”
The Republican US president-elect, a wealthy real estate developer who ran a campaign with a populist appeal, did not state in the interview how he would reduce the cost of prescription drugs. Trump previously has suggested he was open to allowing importation of cheaper medicines from overseas. Trump previously had taken aim at other industries, suggesting an interventionist stance toward business during his presidency.
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Allergan Inc Chief Executive Brent Saunders last week cautioned drug companies against a false sense of security under Trump. “If our industry can self-regulate on pricing, we can all focus on investing in innovative medicines and cures and move the pricing discussion to the back burner,” Saunders said via e-mail on Wednesday.
Trump’s Nov. 8 election victory was initially a boon for drug and biotech stocks, as investors relaxed knowing Democrat Hillary Clinton, who had been critical of rising drug prices, had not won the White House.
The Nasdaq Biotech Index rose as much as 12 percent in the two days after the election. During the past few weeks, however, pharmaceutical stocks had given up the majority of those gains. The biotech index on Wednesday fell more than 3 percent to its lowest level since before the election. The NYSE Arca Pharmaceutical index of U.S. and European drugmakers was down 1 percent on Wednesday.
Chris Raymond, biotech analyst for Raymond James, said investors were unsure of how seriously to take Trump’s latest comments. “Nobody that I have talked to who is an institutional investor has said that they are selling based on this,” he said.
Continually rising drug prices have placed a heavy burden on consumers, many of whom cannot afford their medicines or face increasing co-pays on prescription drugs. Trump has vowed to repeal and replace President Barack Obama’s signature 2010 healthcare reform law, but that pledge does not address drug prices.
PhRMA, the largest pharmaceutical industry trade group, in an e-mailed statement said government mandates and interventions are not the solution for patients when it comes to medicine costs.
“If the drug companies think that they’re going to continue to have free rein to set and raise drug prices because of Trump, I think they’re deluding themselves,” said Erik Gordon, professor at the University of Michigan Ross School of Business. “Nobody who voted for him is in favor of high drug prices.”
CARS, PLANES, THEN PHARMA
The pharmaceutical industry is the latest targeted by Trump. On Tuesday he took aim at a leading aerospace company, urging the government to cancel an order with Boeing Co for a revamped version of the presidential plane due to its extremely high cost.
He previously targeted the auto industry, vowing to block Ford Motor Co from opening a new plant in Mexico and threatening to impose tariffs on cars shipped back across the border.
The heads of those companies have sought direct discussions with Trump.
Jeff Jonas, a portfolio manager with Gabelli Funds, said Trump has brought the idea of drug pricing reform back to life, but added, “I’m still skeptical that anything actually passes through Congress, but the overhang is clearly going to continue.”
Len Yaffe, who manages StocDoc Partners healthcare fund, said that “companies that succeed in bringing transformative medicines to the market will continue to command a premium price.”