Less than two weeks into his presidency, Donald Trump met with several leaders of pharmaceutical companies. During his campaign, he vocally criticized the rise of drug prices and occasionally faulted the government’s inability to negotiate directly on drugs purchased through Medicare. He opened the meeting by once again reiterating his screed against drug prices and demanding that more drugs be produced in the United States. He also vowed to speed the approval of new medicines and ease regulations.
The meeting signaled a defusing of tensions that have kept drug stock prices in check since the election. Shares of most companies rallied Tuesday after the meeting, even as the broader stock market slid.
Focus on Drug Prices
“We have to get prices down for a lot of reasons. We have no choice, for Medicare and Medicaid,” Trump said, citing the nation’s government insurance programs for the elderly, the poor and the disabled.
Trump also said currency devaluation by other countries had increased drugmakers’ outsourcing their production, and he called on the companies to make more of their products in the United States. Foreign countries must pay a fair share for drug development costs, he added. “We’re going to end global freeloading.”
The United States typically pays more for drugs than any other developed nation. Most Western European countries, as well as Japan, have government-run health care coverage under which drug prices are negotiated.
High drug prices have become a national issue during the past two years as healthcare costs have risen. Trump alarmed pharmaceutical and biotech investors by saying on January 11, that drug companies were “getting away with murder” on what they charged the government for medicine and that he would do something about it.
Executives say that Trump never brought up the policy of Medicare negotiating drug prices in private, and that his concern about drug prices did not mean he believes the government should be able to directly bargain.
“We did not have a conversation in there that leads me to believe that they think the solution to that problem is secretarial negotiations,” Merck chief executive Kenneth Frazier said in an investor call Thursday morning. “We know there’ll be bills that are introduced in Congress calling for that. But I think the fact of the matter is … that is not perceived to be the solution to the problem.”
Amgen chief executive Robert Bradway said that the meeting didn’t delve into the specific role the Department of Health and Human Services, which administers Medicare, would play.
“We talked about the need for all of us to work together to address making medicines affordable and accessible to people who benefit from them and need them,” Bradway said.
In an earnings call hours after the meeting, Eli Lilly chief executive David Ricks said the pricing discussion focused on the affordability of drugs to patients at the pharmacy counter. Because drug prices are influenced by many entities between the time they leave the drugmaker and arrive at the pharmacy, that focus could deflect some scrutiny on pricing to other parts of the labyrinthine drug pricing ecosystem, like pharmacy benefit managers that negotiate prices on behalf of insurers.
Industry Response
Celgene, Lilly, Merck and Amgen said by email after the meeting that they were encouraged by Trump’s focus on innovation, tax reform and the need for a more value-driven health care system. Lilly said discussion topics also included stronger trade agreements and removing “outdated regulations that drive up costs and slow innovation.”
PhRMA echoed those points in its own post-meeting statement, adding that the policies, if enacted, would result in up to 350,000 new jobs over the next 10 years. “Tax, deregulation – those are things that could really help us expand operations,” Lilly CEO Dave Ricks said.
Officials at Novartis and J&J did not immediately respond to requests for additional comment.
Shares of the six companies were mostly higher, for an overall gain averaging 0.7 percent, compared with a 0.4 percent drop in the broad S&P 500. The Nasdaq Biotech Index was up 1.2 percent, reversing earlier losses, and the S&P 500 health care index gained 0.6 percent.