Donald Trump plans to use the massive leverage of Medicare and Medicaid spending as a tool to rein in prices — a tactic that has long been feared by biopharma.
In an interview late Saturday with the Washington Post, the president-elect also said he was putting the final touches to a new “insurance for everyone” plan to replace Obamacare, though he declined to provide specifics.
Trump set off a 5-alarm industrywide fire alert last week when he insisted during an impromptu diatribe during his press conference that pharma companies had been “getting away with murder” on drug prices, which he vowed to end once he gets in office in a few days. In the most recent interview, he piled on the biopharma industry, insisting that lowering drug prices was central to moderating the price of healthcare and the insurance needed to cover care.
“They’re politically protected, but not anymore,” he told the Post about pharma, adding later that he was unconcerned about the potential disruption in stock prices. And that’s a comment that could weigh heavily on stocks as analysts ponder the impact.
While Trump touched on direct Medicare negotiations during the election, many of the most influential leaders of the industry had thought that they were in a still cozy spot with the incoming administration, with time to pursue a negotiated peace after branded drug prices had escalated rapidly in recent years. Instead, pharma execs find themselves pilloried by a soon-to-be-president as he spurs populist wrath in favor of controversial changes to healthcare policy.
That became clear during his recent press conference:
“Our drug industry has been disastrous. They’re leaving left and right. They supply our drugs but they don’t make them here, to a large extent. And the other thing we have to do is create new bidding procedures for the drug industry. They’re getting away with murder. Pharma has 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. We’re going to start bidding. We’re going to save billions of dollars over a period of time.”
Trump has a habit of speaking off the cuff, which can lead to some considerable confusion. The main thrust of that comment was that he was focusing on lowering the price of meds, rather than targeting the global drug manufacturing network or actually establishing a traditional kind of bidding mechanism for federal contracts. In the Post interview, though, Trump also said that he wanted to see more drug manufacturing in the US. And he seemed prepare to uncork his Twitter guns to help make that happen.
Medicare has been prevented by law — or, perhaps more accurately, at the insistence of lawmakers — that it not negotiate directly on the price of a drug, though federal benefit managers do that on their own accord. Those net prices, though, are not public.
If Medicare does directly negotiate deep discounts, with perhaps the greatest leverage among all buyers, it could well set up a transparent baseline on drug prices that everyone could work with, while also driving new initiatives preventing state governments from paying more. And that could well wind up costing drug manufacturers dearly, far more than the single digit annual hikes many had hoped to use as a compromise for responsible pricing practices.
It's hard to negotiate, of course, if you're not willing to play hardball. Trump appears ready to play hardball, wouldn't you say? https://t.co/Bc2AQIFnpP
— John Carroll (@JohnCendpts) January 16, 2017
Trump's political antenna is key here. Senses D criticism on lost coverage, so he's making broad access central + populist fight w Pharma…
— Robert Costa (@costareports) January 16, 2017
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