After more than a year of bitter rhetoric attacking pharmaceutical companies and the cost of medicines, President Donald Trump is scheduled to finally release his plans to combat drug pricing today.
The near-term implications for biotechnology and pharmaceutical stocks remain murky on Wall Street. Cowen analysts said in a research note Thursday that they expect Trump’s speech will “be relatively benign, with more drastic proposals coming at a later date or not at all.” Wells Fargo & Co.’s David Maris, meanwhile, has cautioned that calls for lower prices and greater transparency have “never been louder.
Trump’s prolific tweets sank drugmaker stocks in January 2017 when he accused the companies of “getting away with murder” with their pricing. Health and Human Services Secretary Alex Azar said last week that Trump’s plan will be based on the 2019 budget proposal, but go “further, much further” in attacking high list prices and out-of-pocket costs. Investor fears deepened when Food and Drug Administration Commissioner Scott Gottlieb suggested the government could re-examine the safe harbor that drug rebates have under federal anti-kickback laws.
“The speeches by Azar and now Gottlieb increase the uncertainty and show a willingness by the administration to get more aggressive,” Evercore ISI analysts Ross Muken and Michael Newshel wrote in a note to clients.
The S&P 500 Pharmaceuticals Index and S&P 500 Biotechnology Index have each fallen about 7% this year while the S&P 500 Index is up almost 1%. Fund flows continue to signal that generalist investors are skittish about the group. The iShares Nasdaq Biotechnology exchange-traded fund has seen net outflows in 12 of the past 18 weeks and is rebounding after a third month of losses, its longest monthly losing streak since 2011.