This was published 7 years ago
Donald Trump says pharmaceutical industry 'getting away with murder', stocks slide
US President-elect Donald Trump said pharmaceutical companies were "getting away with murder" in what they charged the government for medicines, and promised that would change, sending drugs stocks sharply lower on Wednesday.
The benchmark S&P 500 index slipped into negative territory after his remarks at a news conference spooked investors. The iShares Nasdaq Biotech ETF dropped 4 per cent at its session low and ended down 3 per cent, its largest daily percentage drop in three months.
"When the president-elect says we're going to negotiate drug pricing, you have to take that seriously, but at the same this is a complicated issue because there's not going to be clarity on drug pricing reform anytime soon," said Brad Loncar, manager of the Loncar Cancer Immunotherapy ETF.
"When somebody that high profile says something that negative, people do not want to invest in it."
President-elect Donald Trump: "We are going to start bidding. We are going to save billions of dollars over time." Credit: AP
Mr Trump has blasted other industries for charging the government too much, particularly defence companies, but has made only a few public statements about drug pricing since being elected.
He briefly mentioned Lockheed Martin Corp, Ford Motor Co, and United Technologies Corp during the news conference and promised a border tax for companies producing products for US consumers outside the United States.
Back in May, then-candidate Mr Trump said Amazon was also "getting away with murder", referring to taxes in that case. The stock fell as much as 4 per cent in the next few days but is up almost 12 per cent since Mr Trump's remark.
Pharma on edge
After his promise to bring down drug spending, the ARCA pharmaceutical index gave up as much as 2.6 per cent and ended the day down 1.7 per cent.
The drug industry has been on edge for two years about the potential for more government pressure on pricing after sharp increases in the costs of some life-saving drugs drew scrutiny in the press and among politicians.
The government is investigating Medicaid and Medicare overspending on Mylan's allergy treatment EpiPen, for instance.
David Katz, chief investment officer at Matrix Asset Advisors in New York, said negative comments on drug pricing triggered selling both from algorithms and investors who suffered from share drops when Democrat Hillary Clinton campaigned against healthcare cost increases.
Mr Trump's campaign platform included allowing the Medicare healthcare program to negotiate with pharmaceutical companies, which the law currently prohibits. He has also discussed making it easier to import drugs at cheaper prices.
"We are going to start bidding. We are going to save billions of dollars over time," Mr Trump said.
Medicare, which covers more than 55 million elderly or disabled Americans, spent $US325 billion on medicines in 2015.
Industry trade group Pharmaceutical Research and Manufacturers of America (PhRMA) president Stephen Ubl said "medicines are purchased in a competitive marketplace where large, sophisticated purchasers aggressively negotiate lower prices".
He said the industry was "committed to working with President-elect Trump and Congress to improve American competitiveness and protect American jobs".
Roche Pharmaceuticals CEO Daniel O'Day said in an interview at a JPMorgan conference in San Francisco that Roche Holding focused on innovation and investing in research.
Price increases over the past several years had been "responsible" and in the range of low to mid single digits, he said.
At the same conference, Mylan CEO Heather Bresch said it was premature to respond to Mr Trump's comments, when she was asked during an investor presentation. She said the industry should look again at how healthcare was set up as the government repeals the Affordable Care Act.
Mr Trump said he planned to repeal the Affordable Care Act, or Obamacare, and replace it at about the same time. The news helped shares of hospitals, which are nervous about losing government payments for medical services. It hurt some health insurers, like Anthem, which sell plans on the government-run health insurance exchanges.
Healthcare sector stocks were the largest drag on the S&P 500 and the Nasdaq 100.
Reuters