Pharmaceuticals Rally as CEO’s consult with the President

President Donald Trump recently pledged to tackle the exorbitant cost of prescription drugs by applying pressure to big pharmaceutical companies, who he says have been “getting away with murder.” Trump later added that “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.”

In a report, Bloomberg found that Americans on average spend $1,100 a year on their prescriptions, while many cancer patients spending around $10,000 a month for prescriptions. These astronomical numbers, as noted by President Trump, account for roughly a 17% out of pocket cost to consumers.

As such, the Trump administration initially put forth a proposal, which would allow federal officials to negotiate prescription drug prices for Medicare Part D, similar in fashion to the European Union. However, following his meeting with the CEO’s of Merck & Co. and Novartis AG, Trump began to dial back his position on government regulated prices, choosing instead to advocate for a decrease in regulatory provisions within the Pharmaceutical space, a lowering of taxes and an emphasis on American manufacturing.  

This promise for lower taxes and faster regulatory approval for experimental drugs has served to rally the market, in spite of talks that suggest a lowering of pharmaceutical prices. The general consensus being that such pro-business initiatives shall serve to spur growth and increase profitability for pharma firms. Thus, if all measures work in Trump’s favor, pharmaceutical shareholders or those within the biotech space should see a considerable gain in their portfolio holdings.

As of today, NASDAQ Biotechnology (NBI) has appreciated roughly 4.4% since Jan 24, followed by a string of pharmaceutical stocks that view Trump’s proposals as positive signs for the future.

nbi

In a statement, Merck & Co CEO Kenneth Frazier stated that “The President is very much focused on how we can actually do better for patients, giving them more choice, helping them to deal with the medical bills that they have in a way that also stimulates innovation.” PhRMA’s CEO, Stephen Ubi added, “We believe if these policies are enacted, it will translate to up to 350,000 new jobs over the next 10 years as a result of growth in the biopharmaceutical industry.”

However, critics of President Trump’s proposal, point to his promise of tax cuts and decreased regulatory oversight as feeding into corporate America. But, ultimately the exorbitant state of pharmaceutical prices and the drain on the consumer’s wallet is an issue which even Democrats, Hillary, and Bernie campaigned on.  

Nonetheless, while the issue may have gained some traction on the Street, these policy objectives may be forced to take a back burner to more pressing issues, as the current legislative body of Congress pushes to repeal Obamacare and Trump prioritizes the wall and immigration policy.  


Equity Movers: 

(2/6/17), Amgen Inc. (AMGN) is up 9.7% , Celgene Corp. (CELG) is up 3.2% , Eli Lilly & Co. (LLY) is up 4.0%, Merck & Co Inc. (MRK) is up 6.1%, Novartis AG (NVS) is up 5.5%, GlaxoSmithKline plc (ADR) is up 2.1%, and Teva Pharmaceutical Industries Ltd (ADR) is up 5.4%

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