Trump talked tough on drugs – but has he delivered?
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Trump talked tough on drugs – but has he delivered?

According to the 45th president of the United States, Donald J. Trump, drug companies are “getting away with murder.” That was Mr. Trump in January of 2017. Then, on May 11 this year, the president described his new drug price plan as “the most sweeping action in history.” He’s managed to convince Pfizer to push back on price increases – but has he had any effect on the wider industry? That’s debatable.

Over the last three years, drug price increases have outpaced the consumer price index significantly

 drug price g 180718

Source: Bloomberg

Bloomberg, which is compiling a drugs price index to track the success or failure of Trump’s ambition to bring Big Pharma into line, is unimpressed so far. Robert Langreth, Cynthia Koons, and Jackie Gu, wrote: “For all six categories of drugs, list prices rose far faster than inflation. Prices for 10 commonly used diabetes drugs rose 25.6%, on average, while average prices for rheumatoid arthritis and other autoimmune treatments rose 40.1%.”

Michael Rea, CEO of Rx Savings Solutions, a business dedicated to helping patients find low-cost drugs, agrees that Trump has proven ineffective thus far. He said that the number of price increases seen recently “signals that the fear from government threat is waning.” He also said he expects “no lasting impact from Pfizer’s agreement.”

Of course, for many investors, Mr. Trump’s inability to deliver on his promise thus far is a positive: there was, at one point, a widespread panic that his administration would cripple the profit-making power of the pharmaceutical industry. Undoubtedly, a healthy balance needs to be reached – but for now, it seems as though investors can rest assured that Mr. Trump’s assault on Big Pharma is more bark than bite.

Dominion holds a number of healthcare companies in its Global Trends Managed Fund.

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