(Adds analyst, investor comments, meeting with Democrat)
By Lewis Krauskopf
March 7 Shares of U.S. pharmaceutical and
biotechnology companies fell on Tuesday after President Donald
Trump said he was working on a "new system" to reduce prices in
the industry, without providing details of his plan.
Trump's comments came as he backed a Republican bill to
repeal and replace the Affordable Care Act, known as Obamacare.
"I am working on a new system where there will be
competition in the Drug Industry," Trump tweeted. "Pricing for
the American people will come way down!"
Pharmaceutical and biotech shares fell broadly after Trump's
tweet, but had pared back steeper initial losses by afternoon
Shares of Pfizer Inc and Merck & Co were
down about 0.5 percent, while Eli Lilly & Co dropped 1.1
The Nasdaq Biotechnology index was 0.8 percent lower,
pausing momentum for the index, which has climbed about 12
percent this year after a brutal 2016.
"I’m skeptical about what it is that he might do that would
actually have a material impact on drug prices," said Paul
Heldman, managing partner at Heldman Simpson Partners, which
follows healthcare issues for institutional investors out of
"I wouldn’t rule it out, but I’m just not there yet that he
has some sort of broad plan that has a big impact in the
marketplace that will actually become law," Heldman said.
U.S. Representative Elijah Cummings, the top Democrat on the
House of Representatives Committee on Oversight and Government
Reform, said he would meet with Trump on Wednesday to discuss
efforts to lower prescription drug prices.
Trump has long vowed to repeal and replace Obamacare. The
House Republicans' legislation would eliminate the requirement
that most Americans obtain medical insurance and create a system
of tax credits to encourage people to purchase private
After Monday's release of the replacement plan, hospital
stocks fell, with Tenet Healthcare and Community Health
Systems each down more than 5 percent. Shares of health
insurers were mostly modestly higher.
Trump's tweet was his latest criticism of drug prices.
As president-elect, he said in January that the industry was
"getting away with murder" in what it charges the government for
He told Congress last week that more needs to be done to
bring down "artificially high" prices for prescription drugs.
While drug stocks have reacted to Trump's comments, "so far
there seems to be no there, there," said Ira Loss, senior
healthcare analyst with Washington Analysis.
Loss noted that Republicans historically are wary of
"non-market solutions to drug pricing."
"I think there is a big disconnect between what he’s talking
about ... and what the natural instincts of a
Republican-controlled Congress are," Loss said.
Brad Loncar, manager of the Loncar Cancer Immunotherapy ETF
, said Trump's comments are "the type of statement that
would have sent biotech stocks down 4 percent six months ago."
"The fact that hasn't come anywhere near that so far today I
think is a good sign the market has learned to wait for
specifics on these things and not overreact," Loncar said. "Even
tweets have a law of diminishing returns."
(Reporting by Lewis Krauskopf in New York; additional reporting
by Rodrigo Campos in New York, Susan Heavey in Washington and
Natalie Grover in Bengaluru; editing by Lisa Von Ahn and