Photographer: Tomohiro Ohsumi/Bloomberg

Biotech Stocks Rise After Trump's Drug Price Risk Seems to Lessen

  • Reports say Trump executive order may favor drug industry
  • Biotechnology index has best three-day streak since November

President Donald Trump once said the drug industry was “getting away with murder,” but Wall Street is betting that pharmaceutical companies could end up getting a relatively easy pass as the administration tackles rising drug prices.

In the past week, news outlets have reported that an executive order the Trump administration is preparing will contain industry-friendly policies instead of more aggressive proposals. The policies being considered include efforts to promote cooperative arrangements between drugmakers and insurers, speeding approval of new treatments, and finding ways to make other countries pay more for drugs, according to the reports.

“It just sounds more and more likely that the focus is going to be on removing barriers to entry rather than a direct attack on pricing,” said Brian Skorney, an analyst at Robert W. Baird & Co. “That’s a pretty industry-friendly scenario if it does end up occurring."

Biotech and pharmaceutical investors have taken note. The Nasdaq Biotech Index is up 8 percent since Friday’s close, its best three-day run since November.

Trump said in January that the drug industry was “getting away with murder,” sparking fears that his administration might push for policies that would limit what drugmakers could charge. Instead, reports from Kaiser Health News, The New York Times and Bloomberg News suggest that the coming executive order will ease regulatory hurdles for companies.

A White House spokesman declined to comment on the status of the executive order.

Administration officials met Friday to discuss the executive order, which people familiar with the matter have said may be ready within weeks, Bloomberg reported on June 15. The president has created a “Drug Pricing and Innovation Working Group” led by a former pharmaceutical lobbyist, Kaiser Health News reported on June 16.

Policy Ideas

The group has focused on four areas, according to Kaiser: Extending the patent life of drugs in foreign markets; promoting U.S. drug market competition; value-based agreements; and issuing U.S. Treasury bonds to drug manufacturers to help pay for expensive treatments.

The draft includes proposals championed directly by the drug industry, according to The New York Times, including easing a federal program requiring pharmaceutical companies give discounts to hospitals serving low-income patients.

The value-based agreements, where pharmaceutical companies and insurers agree to pay for drugs based on how well they work, is also an industry-backed proposal.

“All of this has to do with politics,” said Brad Loncar, an independent biotechnology investor. “When negative things are being said, you’re going to have a lot of volume to the down side. When things are positive, you’re going to have a lot of volume to the upside. That’s what’s been happening this week.”

Other Efforts

While the administration group may end up being kind to the drug industry, there are other efforts outside the White House that may not be.

Two Democrats, Representative Elijah Cummings of Maryland and Representative Peter Welch of Vermont, pushed back against the draft executive order in a letter to the president sent Wednesday.

“Your statements and your promises gave many of us hope, but your planned executive actions suggest that you have abandoned these promises in favor of the very pharmaceutical lobby you warned of,” the two wrote.

Cummings and Welch, both members of the House Committee on Oversight and Government Reform, met with Trump in March to discuss drug prices and were encouraged by the session. Trump has previously said that U.S. citizens aren’t getting favorable drug prices.

“The disconnect here is the lack of follow-through and having essentially a pharma-friendly proposal,” Welch said.

Welch said he hadn’t heard back from the White House since sending the letter.

“Instead of coming out with some specifics that would actually address the brutal price increases of prescription drugs, he came out with recommendations that essentially accommodate pharma,” Welch said.

— With assistance by Justin Sink

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