Health

Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

Biotech's Trump Bump is already starting to peter out. The Nasdaq Biotech Index is down nearly 7 percent from its post-election highs. And perhaps that's as it should be.

The industry got an important reminder from Allergan plc CEO Brent Saunders, speaking at the Forbes Health Summit on Thursday, that a Trump presidency won't magically excuse the industry from scrutiny of its pricing practices.

High drug prices are a populist, not partisan, issue. Trump is a populist president-elect -- rhetorically, at least -- with itchy Twitter fingers ready to pounce on anything that might net him political gain. 

Meanwhile, market forces are still putting pressure on prices. Myopic focus on the lower likelihood of government price controls with Hillary Clinton out of the picture is a mistake. Any company that tries to return to old price-hiking ways under Trump may be in for a bad surprise.  

Trump, Jump, Dump
Biotech shares are losing much of the exuberance they showed in the immediate aftermath of Donald Trump's election
Source: Bloomberg

Saunders's analysis of Trump's tendencies and popular sentiment has merit. 

Trump has criticized high drug prices in the past, and flagrant price hikes could be layup opportunities for him to present himself as a champion of the working American. Drug-price hikers make for easy targets; the industry already produced the almost comically villainous Martin Shkreli, and it's a safe bet another bogeyman will eventually emerge. 

Trump's tendency to pop off in 140 characters also makes it easy to imagine him writing tweets "more vicious" (as Saunders put it) than the Clinton warnings that scared the industry so much during the election.

Hating high drug prices is truly an American pastime -- a recent Kaiser Family Foundation poll found 77 percent of Americans think prescription-drug costs are unreasonable. Both Democrats and Republicans support fairly aggressive interventions to lower prices.  Even if pricing is not a legislative priority in a Republican Congress, that doesn't mean it won't still have political potency.

Bipartisanship Lives!
One of the few things that Democrats and Republicans can agree on is that more ought to be done to hold down drug prices
Source: Kaiser Family Foundation
From September's Health Tracking Poll

Some drug-stock bulls might note that words alone can't hurt that much. Anyone holding biotech stocks in the aftermath of Clinton's famous "price gouging" tweet last November will beg to differ. Specific criticism of companies -- such as Mylan NV and its six-fold EpiPen price hike -- can have a contagious affect on other drugmakers and pressure them into decisions that hurt sales. 

In Mylan's specific example, specialty sales declined year-over-year in the third quarter after growing at a breakneck pace for the first part of the year. Wholesale buyers held up purchasing EpiPens ahead of the release of a half-price generic version of the drug, which public outcry forced into existence. The company may suffer more in quarters to come.

Specialty Slump
Mylan's specialty sales have slumped as a result of its EpiPen pricing controversy
Source: Bloomberg

Saunders's company, Allergan, is actively attempting to inoculate itself against such criticism. It has pledged to avoid double-digit price hikes, and it announced on Thursday that it's expanding patient assistance for poorer Americans, a decision that may cost it some revenue growth. It may not be the last company to make such sacrifices -- even under President Trump.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Max Nisen in New York at mnisen@bloomberg.net

To contact the editor responsible for this story:
Mark Gongloff at mgongloff1@bloomberg.net