Tough luck, pharma. Trump may cut taxes and regulations, but he still backs Medicare price negotiation

White House
President Donald Trump still favors Medicare price negotiations, White House Press Secretary Sean Spicer said Tuesday.

Pharma execs might have had reason to hope that President Donald Trump would back away from Medicare price negotiation, what with their mostly chummy White House meeting last week. But Press Secretary Sean Spicer squashed that hope Tuesday. The president is “absolutely” in favor of the price-fighting tactic, he said.

Spicer’s comments—made after last week’s meeting between Trump and Big Pharma and Big Biotech leaders—quickly sent biopharma shares south Tuesday afternoon, but stocks regained some of the losses by the closing bell.

At about 2 p.m. Tuesday, White House Press Secretary Sean Spicer said President Donald Trump "absolutely" favors Medicare drug price negotiations, hurting biopharma shares. Pictured is the iShares NASDAQ Biotechnology Index.

Maybe that's because Spicer's statements leave plenty of questions open. For instance, what does Trump mean by price negotiation? Medicare Part D plans can already negotiate rebates and discounts; handing that power directly to Medicare would put the full force of that huge program behind pricing talks. Is he in favor of Door No. 1, or No. 2?

And then there's the president's shifting tone. On the campaign trail, Trump crossed the party line to back Medicare price negotiations, but then left the measure off his healthcare plan. Then, just before taking office, Trump said the industry was “getting away with murder." He dialed that back a bit last Tuesday to tell pharma CEOs at a White House meeting they’ve “done a terrific job over the years, but we have to get prices down for a lot of reasons.”

Medicare price negotiations weren't a central topic at Trump's pharma confab. Instead, he was full of talk about speeding up FDA review, paring back regulations, cutting tax rates and reforming the tax code—including changes that would allow multinational drugmakers to bring home overseas cash without a tax penalty. Despite his calls for pharma to bring manufacturing to the U.S., the overall message seemed to be that Trump wanted to let deregulation and lower taxes help bring prices down.

Pharma leaders came away from the meeting with an overwhelmingly positive tone. Stephen Ubl, head of industry group PhRMA, said changes to trade agreements and the U.S. corporate tax code, plus fewer regulations, “will translate to up to 350,000 new jobs over the next 10 years as a result of growth in the biopharmaceutical industry.”

In fact, the Medicare comments that drew pharma's attention seemed to oppose price negotiation for Medicare itself—and that may have created post-meeting confusion.

"I'll oppose anything that makes it harder for smaller, younger companies to take the risk of bringing a product to a vibrantly competitive market," he said. "That includes price-fixing by the biggest dog in the market, Medicare, which is what's happening."

Medicare isn't price-fixing, we should note. But Trump went on to advise some sort of price-cutting measures for Medicare. "[W]e can increase competition and bidding wars big time—we have to—into that program," he said.

And now, Spicer's comments. The whipsaw effect has left some healthcare leaders confused. 

In fact, in an internal memo sent to BuzzFeed by an industry source, CEO of pharmacy benefit manager trade group PCMA, Mark Merritt, wrote to his board that Trump’s unpredictability is “rattling industries in the health care sector and beyond.”

After Spicer cleared up the story on Medicare price negotiations, Rep. Peter Welch tweeted that he’s ready to “get it done.” Welch last month introduced a bill to require Medicare drug price negotiations, which he says could save taxpayers an estimated $156 billion over 10 years.

 

Last month, at his first presser said last summer, Trump said he’d push for “competitive bidding” in the pharma industry to save billions in healthcare costs.

Responding to those comments, Pfizer CEO Ian Read said at the World Economic Forum in Davos that Trump likely “hasn’t been briefed” on the great deal of competition in the industry. Read said the “ethical” industry he knows is nothing like some of the companies that have made news over the last year for huge price hikes.