Trump Targets Pharma

Pharma stocks were sent tumbling after Donald Trump targeted the industry in his first press conference in seven months. “We have to create new bidding procedures for the drug industry because they’re getting away with murder,” he said.

“New bidding procedures” could be a reference to Medicare price negotiations, which both Trump and Hillary Clinton had advocated during the election campaign as a means of curbing drug prices (as discussed previously in The Medicine Maker (1)). Medicare is a national social insurance program, mainly for the over 65s, and Part D of that program subsidizes the costs of prescription drugs and prescription drug insurance premiums for Medicare beneficiaries. However, because of a “non-interference” clause, the Secretary of Health and Human Services is prohibited from interfering in the private price negotiations between Medicare Part D plans and drug manufacturers. Although (unlike Clinton), Trump did not explicitly advocate repealing the “non-interference” clause, he did say that Medicare could “save $300 billion” a year, if it negotiated discounts. In the press conference, Trump revised his savings estimate saying, “We’re going to start bidding and we’re going to save billions of dollars over a period of time.” In our feature in September (1), we argued that Trump and Clinton were actually remarkably close on pharma, both agreeing that action is needed to bring down rising drug prices and even agreeing on specific policies. Indeed, Trump may face much stiffer opposition from his own party who have historically opposed Medicare price negotiations – including his pick for head of the Department of Health and Human Services, Representative Tom Price, a Georgia Republican.

In the press conference, Trump also criticized pharma for moving manufacturing operations out of the US. “We have to get our drug industry coming back,” he said. “Our drug industry has been disastrous. They’re leaving left and right. They supply our drugs, but they don’t make them here.” Trump has said he will slap a hefty border tax on goods exported back to the US to encourage companies to manufacture their products in the US. Following Trump’s comments, the S&P 500 healthcare index dropped 2 percent, before rallying slightly. The Nasdaq biotechnology index sank 4 percent, the worst since June 24 – the day after the Brexit vote.

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