President-elect Donald Trump promised to drive down the cost of medicines, defying investors who saw a boon in his election last month and injecting himself again into a contentious economic debate.
“I’m going to bring down drug prices,” Trump said, according to a transcript of an interview posted on Time magazine’s website as it named him its Man of the Year. “I don’t like what’s happened with drug prices.”
Over the past 18 months, companies including EpiPen allergy shot maker Mylan NV and Valeant Pharmaceuticals International Inc. have borne the brunt of public outrage over costs. Last week, the chief executives of Regeneron Pharmaceuticals Inc. and Pfizer Inc. sparred over the reasons their industry’s reputation has suffered, including the role that prices have played.
Trump has joined that critical chorus. His comments published Wednesday were his latest swipe at American industries he views as out of line. He has singled out Carrier Corp. and Ford Motor Co. in efforts to keep jobs in the U.S., and on Tuesday called out Boeing Co. for the cost of replacing the Air Force One presidential aircraft.
Investors believed the election of Trump, a 70-year-old Republican, would be a blessing for free-market health care. His Nov. 8 victory was greeted with a surge in pharmaceutical stocks, but the Nasdaq Biotechnology Index was down as much as 4.6 percent Wednesday in New York, the biggest intraday loss since June 24 and the lowest since the election.
Holly Campbell, a spokeswoman for PhRMA, the drug industry’s Washington-based trade group, said that the focus should be on reducing out-of-pocket costs for patients and increasing access, but resolution should be brought by the industry.
"Government mandates and interventions are not the solution for patients," she said in a statement. "We look forward to working with the administration next year on solutions that will enhance the competitive private market and ensure we continue to deliver innovative treatments and cures to patients."
Drug-company executives and industry observers have already said that Trump may scrutinize their prices as a populist issue.
Allergan Plc CEO Brent Saunders said at a conference last week that Trump might be more “vicious” than defeated Democratic presidential candidate Hillary Clinton. Saunders, who has argued that industry should police itself, worried that drug companies had a “false sense of relief.”
“If our industry can self-regulate on pricing, we can all focus on investing in innovative medicines and cures and move the pricing discussion to the back burner. I think everyone, especially the patient, is better off if that happens,” he said in a statement Wednesday.
The U.S. doesn’t directly regulate medicine prices, unlike much of the rest of the globe. Setting the cost is a murky process: List prices are set by drugmakers, rebates are privately negotiated with intermediaries and the out-of-pocket cost customers pay at the pharmacy varies is based on whether or not they have insurance, and how good it is.
Trump, whose transition team didn’t immediately return an e-mail seeking comment, didn’t make drug costs a major focus during the campaign. His transition team is considering naming Jim O’Neill, a Silicon Valley investor close to billionaire Peter Thiel, to head the Food and Drug Administration, according to people familiar with the matter. The agency is charged with approving new medications.
Trump has supported allowing consumers to re-import drugs from abroad, and mentioned having the Medicare health program for the elderly negotiate prices directly with pharmaceutical manufacturers. Both ideas have long been opposed by the industry and many Republicans, including Rep. Tom Price, the Georgia congressman whom he has tapped to lead the Department of Health and Human Services.
Yet drug costs could also be an area of common ground in Washington. An October pre-election survey by the Kaiser Family Foundation found that the burden was the top health-care issue for the next president. Sen. John McCain, an Arizona Republican, has proposed requiring drugmakers to report any price increase of more than 10 percent. Rep. Elijah Cummings, a Democrat from Maryland, has led his party’s charge against high drug prices.
Trump said this year that renegotiating Medicare prices would save $300 billion a year as the government is the biggest purchaser of prescription drugs. That hypothetical figure, however, would represent the bulk of the $324.6 billion that the U.S. spent on prescription drugs last year, according to the Centers for Medicare and Medicaid Services.
Also, negotiating prices for high-cost drugs alone wouldn’t limit costs, according to an analysis from the Congressional Budget Office. The government would also need the ability to refuse to cover certain drugs.
Quintiles IMS Holdings Inc. estimates the U.S. will spend $461.7 billion on pharmaceuticals this year, and figures that’ll increase at an annual rate of 6 percent to 9 percent through 2021.
Drug CEOs say they don’t gouge consumers. Merck & Co. CEO Ken Frazier said in an interview last week that his company has been restrained in raising the costs of its medicines. Saunders has already sought to distinguish his company from its peers with a pricing pledge that limits increases. Lars Rebien Sorensen of Novo Nordisk A/S said recently his company will cap increases.
Sorensen, whose Swiss company is the world’s largest insulin maker, said innovation comes at a “price and a premium.”
“I’d be worried if policies implemented under the new administration lose sight of this fact in an attempt to restructure the U.S. health system,” he said. “Then you could kill the goose that laid the golden eggs in the process, without really knowing it until it’s dead.”