SAN FRANCISCO -- At his first news conference as president-elect, Donald Trump accused the pharmaceutical industry of "getting away with murder" and said that he would change the way the country bids on drugs to bring spending and prices down.
"Pharma has a lot of lobbies, a lot of lobbyists and a lot of power. And there's very little bidding on drugs. We're the largest buyer of drugs in the world, and yet we don't bid properly," Trump said.
Federal law forbids the government from negotiating with drug companies to bring down the price of drugs for seniors using Medicare. While Trump did not announce a specific plan, he has in the past called for changing the policy to allow Medicare to negotiate on drug prices.
The comment dropped a bomb into the middle of the drug industry's major annual investor conference, underway in San Francisco this week, sending pharmaceutical and biotech stocks plunging. The iShares Nasdaq Biotechnology Index was down 2.7 percent in midday trading. Executives and analysts immediately began to debate the extent to which Trump's comments are a specific policy proposal, or a warning shot.
Speaking at the JP Morgan Healthcare Conference, Mylan Pharmaceuticals chief executive Heather Bresch, who has been under scrutiny for her company's repeated list price increases on EpiPen, a lifesaving drug for serious allergic reactions, said that it would be "premature" to comment on the president-elect's comments because his specific plans are unknown. But she said the past year has taught her that the system must change.
"I think the most valuable lesson learned is that the pricing model has got to change. It's not incremental change; I don't think that's what this country needs. I think it's truly rethinking the business model," Bresch said. "I know that scares a lot of people. ... If anybody is walking away from this conference thinking 'business as usual,' I think that's a mistake."
In an interview, Allergan chief executive Brent Saunders pointed out that in many respects, the new administration's pro-business agenda will benefit the industry, but that public anger about drug prices remains a vulnerability. Saunders has been outspoken that drug companies should show restraint in pricing to avoid a government intervention that could stifle the industry.
"Unfortunately, this is what I was worried about," Saunders said in an interview. "It's a complete contradiction to say the industry is getting away with murder when the industry is committed to saving and improving lives."
He said Trump's comments could potentially have far-reaching implications, scaring investors away from the health care space.
"It goes to show the sentiment, and that causes investors that aren't health care specialists pause, in terms of investing in health care," Saunders said. "It could cause investors in venture capital to have pause in putting money, long-term term into health care, and it could stifle innovation."
AbbVie, a company that has in the past repeatedly raised the list price of its blockbuster arthritis drug, Humira, was giving a presentation at the JP Morgan Healthcare Conference when Trump called for new bidding procedures. Its stock price was down 2.6 percent in midday trading.
"What we fundamentally believe in is being able to bring innovative medicines to the marketplace that ultimately are not only beneficial to patients, but also, over the long term, are providing an economic benefit to the health care system," said Richard Gonzalez, chief executive of AbbVie said. "I don't have a crystal ball as to what changes the president has in mind."
The extent to which negotiation on drug prices, alone, could drive prices down is thought to be limited. A 2007 Congressional Budget Office analysis found that the ability to negotiate alone could be fairly toothless, having a "negligible effect on Medicare drug spending" without the ability to set prices or exclude drugs from coverage altogether by creating a formulary.
Trump also criticized drug companies for "leaving left and right," potentially a reference to inversions in which companies merge with foreign companies to relocate their headquarters in countries with more favorable tax rates. He also criticized them for manufacturing their products abroad.