Drug Stocks Plunge as Trump Threatens to Force Price Bidding
*‘We’re going to save billions,’ Trump says of proposed change
*Biotech index drops 3%, large drugmaker stocks down 1.7%
by Zachary Tracer and Anna Edney
January 11, 2017, 11:30 AM ESTJanuary 11, 2017, 4:24 PM EST
Pharmaceutical and biotech stocks plummeted Wednesday after President-elect Donald Trump said he’d force the industry to bid for government business, a position that aligns him with congressional Democrats and against the powerful drug-manufacturing lobby.
“They’re getting away with murder,” Trump said at a press conference in New York. “Pharma has a lot of lobbyists and a lot of power and there is very little bidding. We’re the largest buyer of drugs in the world and yet we don’t bid properly and we’re going to save billions of dollars.”
The industry is the latest target of a president who’s made a habit of negotiating via Twitter. The Nasdaq Biotechnology Index fell 3 percent in New York, and the Standard & Poor’s 500 Pharmaceuticals, Biotechnology & Life Sciences Index dropped 1.7 percent, the biggest one-day drops for the indexes since October.
Investors had been betting that Trump would be good for the industry — drug and biotech stocks had gained since his election — but it now appears the Republican may take up the banner Democrats carried during the campaign and lock onto drug prices as an issue that hits many Americans in their wallets.
Drug Prices: Costs and Outrage Rise in the U.S.
By Robert Langreth | Updated Jan 11, 2017 8:08 PM UTC
Americans spend more on prescription drugs — average costs are about $1,100 per person per year — than anyone else in the world. It’s true that they take a lot of pills. But what really sets the U.S. apart from most other countries is high prices. Cancer drugs in the U.S. routinely cost $10,000 a month. Even prices for old drugs are spiking, as companies buy up medicines that face no competition and boost charges. While private insurers and government programs pick up the biggest share of the bill, high drug costs are ultimately passed down to the public through premiums and taxes. More than three-quarters of Americans in one poll said that the federal government should make drug affordability its first health-care priority. President-elect Donald Trump vowed to bring down prices.
Drug companies increasingly have become the subject of outrage andscrutiny in the U.S. Lawmakers have probed how they set prices, and the Justice Department is investigating possible price collusion by more than a dozen companies that make generic drugs. Some politicians have accused drugmakers of price gouging. Trump says they’re “getting away with murder.” Martin Shkreli became a symbol of greed in 2015 when the company he then headed, Turing Pharmaceuticals, bought rights to an old anti-parasitic drug and raised its price more than 50-fold to $750 a pill. Turing later offered hospitals discounts on the drug of up to 50 percent. Prescription drug spending in the U.S. began to surge in 2014 after six years of increases held down by the spread of generic drug use. It rose 8.5 percentin 2015. Specialty drugs (high-cost treatments, mostly for complex conditions) account for much of the spending growth. The current backlash first erupted in 2013 when Gilead Sciences released the groundbreaking hepatitis cure Sovaldi at $84,000 for a 12-week course. The steep price and stampede of patients to get the drug led many insurers to restrict coverageto the sickest patients.
SOURCE: ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT
Unlike other nations, the U.S. doesn’t directly regulate medicine prices. In Europe, the second-largest pharmaceutical market after the U.S., governments negotiate directly with drugmakers to limit what their state-funded health systems pay. The U.K.’s National Health Service has refused to pay for some cancer drugs widely used in the U.S. on the grounds that they don’t constitute value for money. In the U.S., drug companies can more or less set whatever price the market will bear. For most outpatient drugs reimbursed through Medicaid, the public health program for the poor, drugmakers must provide the government rebates. But most medicine costs are paid for by Medicare, the government program for the elderly, or by private insurers. When prescription-drug benefits were added to Medicare under a 2003 law, the pharmaceutical industry successfully lobbied toprohibit the federal government from using its huge purchasing power to negotiate drug prices. Private payers typically rely on third-party pharmacy-benefit managers, such as Express Scripts, to negotiate discounts. Often they make exclusive deals with drugmakers, which limits the choice of drugs patients have. Patients directly pay about 17 percent of prescription medicine costs out of their own pockets. In a 2013 survey, one in five adults in the U.S. said they failed to complete a prescribed course of medicine because of cost. The figure was one in ten in Germany, Canada and Australia.
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