When Donald Trump took the stage at his news conference on January 11, most people thought they knew what he would say. We knew he would speak about the Russia scandal and about how he will separate from his business during his presidency. What we didn’t see coming was his mention of the drug industry. Not only did Trump call out the way that drug companies operate, but he also used powerful imagery to evoke the us-versus-them mentality that consumers have against pharmaceutical giants in the first place: They’re “getting away with murder,” he said, a rallying cry that Trump needs to unite a supremely divided country at the moment.
As to be expected, Trump didn’t spell out what exact changes we could expect to see or the plans he has when it comes to Big Pharma and consumers. How he’ll go about changing the operation of drug companies wasn’t part of his speech, but it’s clear that drug companies in the United States had better prepare for change, and likely an uncomfortable one at that. Almost immediately after Trump’s attack, pharmaceutical stocks took a nose dive.
Going Against the Republican Grain
Trump ran on a conservative Republican platform, which generally opposes price controls and federal interference with business operations. Pharmaceutical companies rejoiced at the idea of having a pro-free market president at the helm again after eight years of a liberal Democrat in charge. They feared what might happen if Hillary Clinton – also a liberal Democrat – became president. Much to their relief and the country’s surprise, Trump won the presidency. Immediately after the election results, stocks shot up across the board as big businesses anticipated a business-friendly president taking the Oval Office in January.
The press conference last week put a damper on industry celebrations. Executives in both the biotech and pharmaceutical industries now have big reasons to sweat. In his speech, Trump stated that a lot of industries are making a comeback and that we should focus on our drug industry making one as well. Trump is encouraging new bidding procedures on drugs that will affect Medicare, the largest buyer of prescription drugs. He also wants to prevent large pharma companies from having tax domiciles outside of the United States when their operations are based here. In short, Trump is adopting a less conservative approach to regulating business, which contradicts his own party platform. But even far-right Republicans can agree that something needs to be done about astronomical prescription drug costs.
Medicare doesn’t have much leverage when it comes to negotiating drug prices, but there are other ways that a Trump presidency could lighten the pockets of Big Pharma and bring drugs down to reasonable prices for more Americans. For instance, Medicare can put controls into place to delay acceptance of certain medications into the program. The right Medicare administrator with enough motivation could make life very difficult for pharmaceutical companies, and this kind of bullying tactic might be necessary to spur prescription drug reform going forward. Powerful pharma lobbying groups has kept the government and consumers at a standstill for decades.
Big Pharma Responds to the Challenge
Not every pharmaceutical company was caught off guard by Trump’s press conference. Some companies have been proactive in anticipation of prescription drug reform, regardless of who won the election. Allergan is one such company. In December 2016, Allergan CEO Brent Saunders announced that they would be expanding their patient assistance program to help people afford medication for conditions like mental illness and infectious diseases. He also vowed to limit Allergan to a maximum price increase of 10 percent per year.
Saunders was particularly vocal last month about Trump’s presidency and its impact on Big Pharma. He believed that the next drug scandal, something akin to the price-gouging blunder for EpiPens, would cause Trump to lash out against drug companies. He told his peers that it was time to start taking action and to expect that they would be under fire once Trump took office and started cleaning house. Little did he or anyone know at the time that Trump was going to make drug companies the prime target of his first post-election press conference.
Allergan isn’t the only company preparing for change. Leonard Schleifer, billionaire founder of Regeneron Pharmaceuticals, outlined his concerns for the industry during a recent investor presentation. He discussed pharmaceutical pricing, the reputation of drug companies and the finances of his own company. Schleifer believes that the American people hate Big Pharma because prices are rising rapidly without corresponding innovation. He mentioned the double-digit price increase of some drugs, a fact that he pointed to as evidence of public mistrust.
Despite some acknowledgment on the part of drug companies that their industry needs work, several top executives disagree with their peers. Pfizer’s CEO, Iam Read, has defended drug companies by asserting that the cost of drugs has remained largely the same when you take into account the total percentage of healthcare in the U.S. John Milligan, chief executive of Gilead, points out that several life-saving medications have hit the market thanks to his company, which manufactured a new hepatitis C drug that cures the disease. That drug (Sovaldi) sells for $96,000 a year.
The Future of Prescription Drug Reform
Popular opinion is that pharmaceutical companies are greedy and inflated, even if their products treat symptoms, prevent diseases and save lives. Trump thrives on popular opinion, so it’s likely that his healthcare reform plans will target Big Pharma in the coming months. The president-elect recognizes that drug companies provide the public with a necessary service, but these companies are members of the private sector. He believes that healthcare reform should include eliminating the barriers that prevent drug providers – who offer safe, reliable and cheaper medications – from entering the free market. For this to work, Congress needs to cut ties with Big Pharma special interests and put the interests of the American people first. Healthcare reform may also involve giving American consumers access to drugs that are imported from overseas, provided that they’re still safe and dependable.