Oh, the power of a Donald Trump sound bite. On the campaign trail and as president-elect he has made occasional noises about drug pricing—giving the U.S. Medicare system, the largest buyer of drugs in the world, the right to negotiate prices, for instance.
This morning, in his first press conference, Trump went further. He said drug companies are “getting away with murder” because of the prices they charge. Here’s the transcript, courtesy of NPR.
“I think a lot of industries are going to be coming back. We have to get our drug industry coming back. Our drug industry has been disastrous. They’re leaving left and right. They supply our drugs, but they don’t make them here. To a large extent. And the other thing we have to do is create a new bidding procedures [sic] for the drug industry because they’re getting away with murder.
Pharma, pharma has a lot of lobbies, a lot of lobbyists, and a lot of power. And there’s very little bidding on drugs. We’re the largest buyer of drugs in the world, and yet we don’t bid properly. And we’re going to start bidding and we’re going to save billions of dollars over a period of time.”
It was not clear if, by “get our drug industry back,” he was calling for the end of tax-inversion mergers that move the headquarters of American companies overseas for tax purposes. Such a move was the reason Pfizer wanted to buy Allergan for $160 million last year, but new U.S Treasury rules were reported to be the demise of the deal. It’s also possible Trump was alluding to a lower tax on cash that U.S. companies bring home from overseas businesses. His administration and the Republican Congress are widely expected to make so-called “repatriation” easier. The last time lawmakers allowed U.S. companies a brief tax-repatriation window, it was touted as a way to create more domestic jobs. In the drug industry, led by Pfizer, the money did not go to support new jobs, however.
Trump’s call today for government negotiation with drug makers was more clear. Current law does not allow Medicare to negotiate prices, but Medicaid and the Veterans Administration do have those rights. There are debates whether giving Medicare the right to negotiate would “save billions,” as Trump claims. But the attitude here is what counts. Just ask investors. One prominent biotech investor cancelled his meeting with me with five minutes’ notice with this note: “Trump pandemonium just hit stocks.”
The rest of the investor world might not notice too much. As of this writing, the biotech-heavy Nasdaq is down very slightly, less than a third of a percent. The S&P 500 has dipped even less.
But the Nasdaq biotech index is down more than 3.5 percent, and the NYSE biotech index is down nearly 3.5 percent, as of this writing.
The Trump declaration, for what it’s worth—remember, an anti-negotiation Republican party controls Congress and will have its say—comes after biopharma industry executives have spent considerable time at the J.P. Morgan healthcare conference in San Francisco talking up their own plans to be responsible about drug pricing in an effort to get out in front of potential regulation.
At the same time, executives have noted possible benefits a Trump presidency could bestow upon their businesses: lower taxes, especially repatriation, less regulation, and the general sense that Republicans won’t mess with a “free market.” These discussions, to be fair, have often come with caveats about what Trump and Republican policies could mean for healthcare affordability and access for the common citizen.
But Trump’s comments this morning, his boldest yet about Medicare negotiation, show that the industry has no right to get too comfortable.
Donald Trump photo by Michael Vadon via Creative Commons 2.0 license.