In the hours after Americans had cast their ballots on November 8, 2016, stocks around the world began to drop at rates that scared political commentators and newscasters. It seemed as if America should have been preparing for the worst. But in the days that followed, stocks climbed back up again, eventually soaring into new heights. In fact, the post-election stock market pushed some executives into billionaire status, such as Charles Ergan of Dish Network and Stuart Miller of Lennar.
Most Americans weren’t sure what to expect from President Donald Trump’s first post-election day press conference on January 11. In true Trump fashion, there were a few surprises, including his attack on the pharmaceutical industry. In his speech, Trump called big pharma out for their questionable practices, like price gouging consumers and moving their operations overseas with the help of mergers and acquisitions.
Although no one had predicted that drug companies would come under fire during his speech, President Trump’s sentiments reflected what many Americans have been feeling. Today’s consumers are tired of paying outrageous prices for life-saving drugs or drugs that drastically improve their quality of life while watching big pharma swell with hefty profits.
A Shock to the Industry
Investors didn’t see Trump’s attack coming, either. Following the press conference, pharmaceutical and biotechnology stocks fell at astounding rates, like those of AbbVie Inc., which dropped by 3.61 percent. Other big pharma companies affected by the drop include Biogen Inc., Valeant Pharmaceuticals International, Inc., and Mylan N.V. Merck was perhaps the least scathed in the aftermath, with a 2.6 percent rise in their stock, owing in large part to the fact that the FDA has approved their bid for an accelerated review of an immune-system medication that will be used along with chemotherapy treatments for advanced forms of lung cancer.
However, the entire NASDAQ Biotechnology Index dropped nearly 3 percent at the close of the market on January 11, making only a slight recovery by the close of day on Friday, January 13. In stark contrast, the same index rose by nearly 9 percent the day after the election. Early in the election cycle, pharmaceutical companies and investors feared the worst from a Clinton presidency. Hillary Clinton was vocal in her stance against rising drug prices, which led many in the pharmaceutical industry to fear a rigorous overhaul under her watch. Once Trump was elected, big pharma’s attitude shifted to optimism as a big business magnate assumed the office.
Following Trump’s press conference remarks, much of that optimism has tapered off into anxiety and even pessimism in some cases. Randall Schatzman, CEO of Alder Biopharmaceuticals, declared the tone at the 35th annual JPMorgan Healthcare Conference to be cautiously optimistic. Stocks were predicted to climb after the JPMorgan conference, and that certainly didn’t happen.
A year ago, at the same event, Schatzman reported that the outlook was undoubtedly pessimistic as they prepared for Hillary Clinton to be sworn in as the next president. They knew that under her presidency they would likely see tighter controls and decreased profits. When this didn’t come to fruition, big pharma rejoiced. While Schatzman stands firm on the industry’s cautious optimism, he does admit that pharmaceutical stocks were not helped by what Trump had to say.
Appealing to the Populace
Trump’s displeasure with the pharmaceutical industry is just one example of the new president’s appeal to popular opinion. Nobody likes big drug companies, which often get pegged as a scapegoat for all of the woes of the healthcare industry, from excess costs to heavy reliance on medications.
In the wake of Trump’s press conference, pharmaceutical companies are not sure what to expect. It appears that President Trump will be aligning himself more with the Democrats in terms of regulation and oversight. Trump mentioned in his speech that he wants big pharma to bring their headquarters back to the United States and to allow Medicare to negotiate the price tags on pharmaceuticals. This could substantially impact drug company profits and cause investors to back off.
For now, pharmaceutical executives wait to see what Trump will unveil in the coming months of his presidency. It seems that while there are reasons for concern, the pharmaceutical industry is still more hopeful about its future than it would have been under a Clinton presidency. As with many other uncertainties America faces right now during this transition of power, Trump’s plans for big pharma remain to be seen.