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Fred Dunkley

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Fred Dunkley is a tech analyst, writer, and seasoned investor. Fred has years of experience covering global markets and geopolitics. 

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Trump Backtracks On Big Pharma Crackdown

Trump

From the Trump administration’s perspective, Friday’s drug bust represented “the most sweeping actions in history to lower the price of prescription drugs for the American people”, chipping away at an industry that was “getting away with murder”.

To some, Trump’s announcement fell far short of the aggressive offensive promised on the campaign trail, leaving the drug industry relieved and pharma stocks feeling fine, but still, the pharma industry has expressed some concerns.

Stocks, though, seem relieved. Most major pharma stocks were still trading up as of market close Monday.

So, what exactly will the new measures do?

The Trump administration is calling for measures to boost competition to drive drug prices down and cut out-of-pocket expenses for patients. In his own words: “We’re very much eliminating the middlemen. The middlemen became very, very rich. Right? Whoever those middlemen were - and a lot of people never even figured it out - they’re rich. They won’t be so rich anymore.”

The problem is that those not aligned with pharma lobbying groups were expecting the death of the middleman based on the campaign promise to use Medicare to directly negotiate lower prices for seniors, for one. They didn’t get it.

Among other elements, the plan includes these potential items:

• Disclosure of cost of medicines by drugmakers in TV ads;

• A ban on a ‘gag rule’ that prevents pharmacists from telling customers when they can save money by paying cash instead of using insurance;

• Speeding up approval processes for over-the-counter medications;

• Review of how Medicare pays for high-priced drugs administered at the doctor’s;

Yes, there’s more transparency, but many still don’t see how the plan is going to truly confront the soaring costs of drugs for Americans.

And Americans pay an exorbitant amount of money for prescription drugs—far more than anyone else, anywhere in the world.

Since the 1990s, American’s have seen the price of prescription drugs double. But that’s nothing: In the past 12 months, they’ve seen prices increase 6 percent, CNN reported, citing GoodRx. Medicare drug prices—for seniors—rose 10 times the rate of inflation.

To hit this point home, consider this:

• Actimmune, used to boost the immune system in chronic granulomatous disease, costs over $52,000 for one month.

• One month of Daraprim—an antiparasitic—costs $45,000 for one month.

• Cinryze, a CI inhibitor for a rare hereditary condition of angioedema, costs over $44,000 for one month.

And the list goes on …

The logical argument is that this is a free market and companies set prices to whatever the market will withstand—so the pharma companies are nothing more than rational actors. Related: Crypto Hedge Funds Post Best Gains In Years

Why then are some pharma representatives worried—even though share prices are either unfazed or actually responding quite positively?

Stephen Ubl, president of the Pharmaceutical Research and Manufacturers of America (PhRMA) called Trump’s proposals “far-reaching”, and said they could “fundamentally change how patients access medicines and realign incentives across the entire prescription drug supply chain”. 

“Misaligned incentives in the supply chain are resulting in savings for middlemen, but higher costs for patients,” Ubl said. “After negotiations, medicine prices increased just 1.9% last year, below the rate of inflation, and yet patients’ out-of-pocket costs continue to skyrocket. Giving patients access to negotiated discounts at the pharmacy counter and protecting seniors in Medicare Part D from catastrophic costs would help make medicines more affordable. We will be reviewing the request for information and look forward to participating in the comment process in the coming months.”

Democrats who were counting on much more, though, categorically disagree, with Rep. Lloyd Doggett of Texas calling the plan “a sugar-coated nothing pill”.

Investors focus on the rational market element, and little more:

“Trump had a choice today: to seek disruptive fundamental reform or to embrace more incremental steps,” wrote Terry Haines, a financial analyst, in an investment note. “Trump chose the incremental over the disruptive.”

Regardless, pharma stocks are clearly relieved, and the end result is that no direct confrontation with the drug industry in the cards—not today.

By Fred Dunkley for Safehaven.com

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