Pharma watchers waited with bated breath for Friday's drug pricing speech from President Donald Trump—who famously said the industry is "getting away with murder." But the speech lacked surprises that could have negatively affected the industry, according to experts, and one analyst called it "very, very positive" for pharma.
Trump's plan, released Friday in a 44-page document (PDF), calls for more competition, more negotiation, incentives to lower list prices and lowering out-of-pocket costs. But it doesn't propose giving Medicare Part D the power to negotiate prices like Medicaid does, a measure Democrats wanted badly and the industry most feared.
While many of the Trump Administration's proposals have been discussed before, officials did suggest at least one novel idea. Department of Health and Human Services secretary Alex Azar said drugmakers should have to disclose pharmaceutical prices on ads, giving consumers more information and changing pharma's pricing incentives at the same time. The administration is directing the FDA to consider the proposal.
Many pharma shares, plus those for pharmacy benefit managers CVS and Express Scripts, traded up after the speech, indicating relief for investors who may have been concerned about harsher regulatory changes.
Michael Rea, founder of Rx Savings Solutions, told FiercePharma that "in typical Trump fashion, he used strong words," calling out "pretty much everybody" from the supply chain to the drug industry.
"I think it'll be interesting to see how it is backed up," Rea said.
Rea said any proposals that the administration can do itself are more likely to happen than those that need congressional approval.
At the White House on Friday, Trump said it's time to stop the "global freeloading" of U.S. innovation by foreign governments that pay far less for the same meds than U.S. payers. Even if the administration is successful in getting other countries to pay more for the same drugs, that doesn't guarantee U.S. prices will come down, Rea contended.
In a brief video discussing the speech, Bernstein analyst Ronny Gal said the developments were "very, very positive to pharma."
"We are not seeing anything about that speech which should concern investors," he said, adding that the administration is proposing market-based measures to lower costs.
Leerink Partners analyst Geoffrey Porges wrote on Friday that the plan is "much less draconian than feared," noting that the administration didn't propose reimportation, mandatory contract transparency or any changes to patent terms.
He said the "limited impact of greater price transparency, which the industry will oppose, seems a small price to pay if indeed those proposals are implemented."
The plan even contains some "meaningful positives" for pharma, according to Credit Suisse analyst Vamil Divan, such as boosting prices overseas and moving to reduce out-of-pocket costs. Divan wrote that the latter strategy would help pharma's volumes.
The discussion around drug rebates on Friday was "better than feared," Divan wrote. He added that the plan doesn't harm supply chain companies in any big way; CVS Health has already said it doesn't expect the policy proposals to hurt its profitability.
Still, both Divan and another analyst, Wells Fargo's David Maris, believe drug pricing will remain a political issue through the midterm elections this year. Maris wrote in a note that pharma's stock rally Friday is perhaps the "last thing the drug sector needed" because it could make administration officials believe their plan isn't "tough enough."
More than a year ago, then-President elect Donald Trump said at a press conference that the drug industry was "getting away with murder" with its pricing, blasting its lobbyists in Washington, D.C. He again blasted special interests Friday for their role in high prices.
But during Trump's first year in office, the pharmaceutical industry's top lobby group boosted its spend by 30% to work on patent issues, importation, Medicare negotiations and more. And during that time, many drugmakers took their routine price hikes. Trump has also appointed industry insiders to top posts at the HHS and FDA.
A number of the proposals presented Friday have been discussed by FDA chief Scott Gottlieb, who set out his agency's plan to bolster competition and lower prices a year ago. They include stopping patent abuses and the regulatory "gaming" that drugmakers use to stifle generic competition.
Editor's note: This story was updated with commentary from analysts.