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.

If you're deeply underwater, you'll grasp at just about any hand for aid. Be wary if that hand happens to be Donald Trump's. 

Before the election, with the Nasdaq Biotech Index (NBI) down more than 30 percent from its 2015 highs, biotech investors took heart from Trump's win, assuming he'd be more forgiving of high drug prices than Hillary Clinton.

That was a risky assumption from the start, as I have previously emphasized, given Trump's past campaign rhetoric and populist bent. It has turned out it be poor one. In an interview with Time magazine released Wednesday, Trump outright said, "I'm going to bring down drug prices." 

From Trump Bump to Trump Slump
Biotechs have given up nearly all of their post-election gains
Source: Bloomberg

That may just be the beginning of the sector's troubles. A Trump Twitter reaction to any (inevitable) future pricing scandal will likely be substantially spicier than Clinton's September 2015 tweet accusing the industry of "outrageous" price-gouging, which hurt shares across the sector. The NBI fell 3.6 percent after Trump's comments on Wednesday but is still about 1 percent above where it was before the election. The industry still may not have fully come to grips with how wild and potentially unpleasant the next four years could be. 

There's a nascent movement, led by Allergan CEO Brent Saunders and Danish diabetes drugmaker Novo Nordisk, for biopharma to better self-regulate on drug prices so it can focus on new drugs and insulate itself against criticism. Both firms have publicly pledged to limit drug-price hikes. 

Brent Saunders @brentlsaunders
@MaxNisen Agreed our industry does so much good for patients, let's just self regulate pricing so we can move focus… https://t.co/cn0ElzHZGh
Twitter: Brent Saunders on Twitter

But the movement consists of just those two, so far. Portions of the industry still vocally defend the right to double-digit list-price hikes, or are at least driven to such hikes by the perverse economics of the industry or the lack of new and growing drugs. Even if biopharma were to embrace pricing restraint more broadly, smaller actors could still go rogue, attracting Trump's ire to the whole sector.

The Trump biotech bull thesis also assumes that a combination of friendlier tax policy and lower politics-related volatility might inspire more biotech M&A. That could be another risky assumption. 

No Calm After the Storm
The election was a volatile time for biotech stocks, and it looks like the Trump administration might continue the trend
Source: Bloomberg

It's far easier to complain about high drug prices than to lower them. Cutting drug prices has populist support, but actually cutting them can mean limiting access to medicines, which is the opposite of popular. It seems unlikely Republican lawmakers will overcome their historic opposition to price controls, or that Trump will join hands with Democrats to limit price increases. 

But if there's any lesson to be learned from the election and months of drug-stock volatility -- when mere tweets have at times crushed individual stocks and the whole sector -- it's that actions are overrated. Words alone can create plenty of mess.

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