President Trump Tosses Tweet-Bomb at Drug Industry, Stocks Drop
March 7, 2017
By Mark Terry, BioSpace.com Breaking News Staff
President Trump, apparently taking a short break from tweeting about alleged wiretaps, tossed a tweet-bomb at the pharmaceutical industry this morning. At 8:46 a.m. he tweeted: “I am working on a new system where there will be competition in the Drug Industry. Pricing for the American people will come way down!”
I am working on a new system where there will be competition in the Drug Industry. Pricing for the American people will come way down!
— Donald J. Trump (@realDonaldTrump) March 7, 2017
As is often the case with President Trump’s twitter blasts, no one seems to know what exactly he’s referring to. One of the first things the Trump-elect Administration claimed only days after the election was plans to “reform the FDA.”
On March 1, during his first address to a joint session of Congress, Trump stated that the U.S. drug approval process was “slow and burdensome.” According to Trump’s 100 Day Plan, there are “over 4,000 drugs awaiting approval, and we especially want to speed the approval of life-saving medications.”
He has also called, without much detail, on loosening restrictions on drugs that have been approved by foreign regulatory agencies. However, Trump has yet to appoint a new head of the FDA. Some of the names suggested have included Jim O’Neil and Scott Gottlieb, a former deputy commissioner at the FDA. Both are viewed as “disruptors” who have called for a variety of questionable changes, including approving drugs based on safety, but not whether they have proven to be effective.
Trump’s tweet caused some changes in biopharma stocks, although they seem to be recovering. The iShares NASDAQ Biotechnology Index Fund (IBB) dropped 1 percent in premarket trading. XBI lost more than a point, then started to recover.
John Carroll, writing for Endpoints News, notes, “The president’s social media pronouncements don’t have the same bite as we saw in the days after his inauguration.” At least in regards to stock prices.
Carroll also writes, “I’ve found many execs in biopharma believe that the drug industry is plenty competitive as it stands. Also, there’s been little evidence that faster development will reduce the cost of new drugs.”
Ulmer Raffat, an analyst with Evercore ISI, wrote of Trump’s tweet, “Question really is: what does that mean? Recall that President Trump has previously made references to ‘bidding.’ There are 2 types of competition: 1. Brand vs generic—this already exists (and in fact, market forces drive generics to have very fierce pricing wars); 2. Brand vs brand—for this to happen, you need interchangeable branded products … e.g., just because 2 drugs are approved for same indication doesn’t make them direct ‘competition.’”
Raffat goes on to identify five things needed for true competition among brands to exist: multiple drugs in the same class, the same indication, same route of administration, similar efficacy, similar safety.
Some drugs have these, but not all. He goes on to write, “most importantly, many therapeutic areas with generally interchangeable branded products are already under Part D … and have formulary tiers etc. And that’s the ultimate question: is the President referring more to Part B (where no formularies exist currently)? Reality is, we don’t know until something definitive is put out.”
It’s also pointed out that the president’s tweet came out after the House Republicans released their legislation to repeal and replace the Affordable Care Act, which is dubbed the American Health Care Act.
“We are intrigued by the timing of President Trump’s tweet this morning as it followed rapidly behind the House health-care reform bill, and we believe shows the administration’s continued focus on drug pricing,” wrote Vamil Divan, an analyst with Credit Suisse AG, in a note to clients.
It’s entirely possible that Divan and others are setting more store on Trump’s strategy in terms of tweets than they probably deserve. In his six weeks in office, they have tended to be reactive, blasted out in response to a news report he saw on TV, although some believe his tweets are used at diversionary tactics to shift press coverage away from more problematic topics, such as Russian influence on the election, cabinet members lying under oath, and controversial executive memos.
BloombergMarkets wrote, “No sector of the drug industry was spared Tuesday. Stocks of major manufacturers like J&J and Merck had smaller declines, 0.2 percent and 0.7 percent respectively. Drug wholesalers also fell, with McKesson Corp. down 1.3 percent, Cardinal Health Inc. dropping 0.4 percent, and AmerisourceBergen Corp. declining 0.7 percent.”
Trump also tweeted late last night: “Thank you to @exxonmobil for your $20 billion investment that is creating more than 45,000 manufacturing & construction jobs in the USA!”
That didn’t seem to help the company’s stock, which is trading at $82.32, down from $92.58 on December 13, 2016.