Drugmakers come up Trumps
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Drugmakers come up Trumps

On Tuesday, an assortment of pharmaceutical top dogs met with the new president of the U.S. to talk business – and they more or less liked what they heard. Given the occasionally explosive opinions that Mr. Trump has issued over drug pricing, it was not ridiculous to assume the worst. However, that did not come to pass: the U.S. government won’t be setting drugs prices.

In fact, pharmaceutical companies got some good news on Tuesday, when executives were promised lower taxes, quicker regulatory approval, and (according to Bloomberg): “help defending them against foreign countries that are able to charge less because American consumers pay more.”

According to Jeff Jonas, portfolio manager at Gabelli & Co. in New York, the President “Could’ve been a lot harsher on them on pricing.” But, it wasn’t all good news. In keeping with his promise to return jobs to the U.S., Mr. Trump insisted that pharmaceutical companies move manufacturing back to the country – despite higher costs associated with it. This is by no means the end of the world, but it’s a significant hurdle to jump: the U.S. pharmaceutical industry outsources 80% of its active ingredients and 40% of finished drugs.

Moving the production of those active ingredients and finished drugs back to the U.S. will solve another problem though: the lack of proper regulation in the markets they are generally made, India and China. The FDA’s overseas workforce is so small that it simply can’t inspect the majority of the facilities that supply these things – meaning there are legitimate concerns over their quality.

Speeding up the process of getting drugs to market proved popular with executives, with Pfizer’s CEO Ian Read saying: “We’ve been advocating for a long time to speed up the approval of generics and remove the barriers to their approval. That will help with drug prices.”

Trump also spoke to worries about price-fixing by Medicare, saying: “I’ll oppose anything that makes it harder for smaller, younger companies to take the risk of bringing their product to a vibrantly competitive market. That includes price-fixing by the biggest dog in the market, Medicare, which is what’s happening. But we can increase competition and bidding wars.”

Certainly, Tuesday’s message was much more favourable than Mr. Trump’s claim, made on January 12, that drugmakers were ”getting away with murder,” when it came to pricing. It’s clear that healthcare is a sector that the new administration has firmly in its sights – the only question is, what comes next?

Disclosure
Dominion holds numerous pharmaceutical stocks in the healthcare sector of its Global Trends Managed Fund, including Pfizer and Novartis.



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