An interview with Time upon his selection as the news magazine's Man of the Year brought President-elect Trump's most definitive statements to date on drug prices: "I'm going to bring down drug prices. I don't like what has happened with drug prices."
The incoming president, though, has been short on details. And many observers say his bigger focus will be to streamline the U.S. Food and Drug Administration drug approval process. That effort got a boost on Wednesday, the same day Trump's Time interview was published, when the U.S. Senate approved a bill aimed at speeding up approval for drugs and medical devices. President Obama is expected to approve the so-called 21st Century Cures bill.
But just what actions Trump will take remain as unknown as any resolution to the issue of drug prices that, at times, jump exponentially despite the critical needs of patients.
Trump has vowed to repeal President Obama's Affordable Care Act. And he's promised to "drain the swamp" of special interests in Washington that helped contribute to the rise of Big Pharma.
Before the Time interview, though, he hadn't broached the drug pricing issue, which just after his election boosted drug stocks. The iShares Nasdaq Biotechnologg ETF (IBB) jumped 12.6% in the two days after the Nov. 8 election, but it's fallen 8% since. IBD's 421-company Biomed/Biotech industry group jumped 9.7% on Nov. 9, while the generic and ethical drug groups rose 7% and 5.7%, respectively. The groups have given back those gains.
Trump can't ignore rising drug prices, says Trevor Williams, Penn Mutual Asset Management managing director. The trouble is that the businessman and reality TV star is a relative political enigma, Williams told IBD.
"It's hard for me to see him being a champion (of lowering drug prices) in the same sense Hillary would have been because he's so focused on dismantling the ACA," Williams said. "But with Trump not having a political history, it's really difficult to telegraph where he's going to go with it."
Some of his policy proposals, though, could be telling.
'Make Drug Development Great Again'
Trump pledged in a "Contract with the American Voter" to fully repeal the ACA, better known as ObamaCare, within his first 100 days in office, replacing it with Health Savings Accounts. In that vein, he said he'll cut down on FDA "red tape."
"There are over 4,000 drugs awaiting approval, and we especially want to speed the approval of life-saving medications," Trump wrote in his contract.
Trump's crack at the FDA is nothing new, says Credit Suisse analyst Vamil Divan. Yet, in recent years the FDA has worked to expedite sorely needed drugs through its Fast Track Designation and with the Prescription Drug User Fee Act, which helps fund drugs quickly.
Still, there is a backlog in approvals of generic drugs, Divan told IBD. Many proposals in the works have targeted making the approval process for generic drugs — cheaper drugs similar to drugs out long enough that they've lost their patent protection — much easier.
Trump's platform would remove barriers to entry for "safe, reliable and cheaper" products. Trump could also allow broader and off-label use for a number of drugs, Penn's Williams said.
His replacement plan for the ACA remains somewhat ambiguous. Trump has backed off earlier promises to fully repeal the act. For one, he says he'll maintain provisions that require insurers to cover patients with pre-existing conditions and let parents cover their children through age 26.
Obama didn't touch pharmaceuticals much in his ObamaCare legislative centerpiece, says Divan, outside of requiring drugmakers to pay for some of the expanded health care coverage. If Trump completely does away with the ACA — which is unlikely, Divan says — some of those fees could disappear.
"Backroom negotiations (for the ACA) let the companies come out reasonably well," Divan said. Repealing the ACA could put the cash from those fees back into drugmakers' pockets.
Yet, Wall Street is anything but reasonably sure how Trump-care could affect biotech and drug firms.
Can Transparency and PBMs Coexist Peacefully?
Trump doesn't appear to have any vendetta against pharmacy benefit managers (PBMs), but drugmakers might. PBM tactics undercut Amgen (AMGN) and Eli Lilly (LLY) in Q3, prompting both stocks to topple in late October after Amgen offered dim 2017 views and Eli Lilly saw diabetes sales take a hit.
PBMs are third-party administrators for commercial, government and Medicare health plans. PBMs use discounts and competition to keep drug prices low, which can help patients but raise conflicts with drugmakers.
Amgen stock toppled nearly 10% on Oct. 25 after its Q3 sales of immunosuppressant Enbrel came in flat. The firm, though, said it doesn't expect any net selling price increases in 2017. The business will be driven on volume, Amgen executive Anthony Hooper said on the company's earnings conference call.
IBD'S TAKE: Rebates chipped away at Amgen's Enbrel sales in Q3. What does this mean for the broader industry? Grab IBD's Industry Themes for a deeper look.
Eli Lilly stock on Oct. 25 after its Q3 sales of diabetes drug Humalog fell 14% "as higher volume was more than offset by lower realized prices," the company said in its earnings conference call, after EPS and revenue missed Wall Street targets.
Trump's lack of commentary on PBMs could be telling, Divan told IBD. As it stands, the government is not involved in drug price negotiations. But Trump could work to change this in order to lower drug prices. That's not been a focus of Republicans, Divan says, though Trump is not your typical Republican.
The question, he says, is whether "the new administration willing to go after something (Big Pharma) politically to score some points with the general public?"
Drug companies have their own views, of course. Merck (MRK) CEO Ken Frazier this month, in a Bloomberg interview, said his company has been "restrained" in raising prices.
"There will always be an individual drug in an individual year that you can point to and say, 'That looks large in relation to others.' But if you look at the whole portfolio, you will see that Merck has tended to be rather restrained when it comes to drug prices," Bloomberg reported Frazier saying.
Bloomberg also reported this month that Allergan (AGN) CEO Brent Saunders said Trump could "be more vicious, more focused, on taking down whoever does something again" in terms of spiking the price of a drug or drugs. Bloomberg had interviewed Saunders and Frazier after both appeared at the Forbes Healthcare Summit in New York on Dec. 1.
More Patients Criticizing Drug Prices
There's no question patients have had it with high drug prices.
The Kaiser Foundation found in September that 77% of Americans, up from 72% last year, believe drug prices are too high. Americans generally support requiring firms to release information on how prices are set and allowing the government to negotiate drug prices.
Kaiser's survey followed a drug pricing controversy that erupted in September over Mylan (MYL) boosting its price on a pair of EpiPens to $600 from about $100 in 2007. Its CEO, Heather Bresch, was subjected to tough questioning at a House committee hearing.
Last year, a similar controversy prompted Capitol Hill hearings involved Turing Pharmaceuticals and its former CEO, Martin Shkreli, involving big hikes on a decades-old HIV drug. Valeant Pharmaceuticals (VRX) has also imposed huge hikes on drug prices.
The U.S. Justice Department is investigating and is expected to file charges against some generic drug companies for price collusion before year's end.
Yes, while analyst Divan says "I don't think the issue is going away," he also says he sees fewer chances of big changes to drug pricing policies under Trump.
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