Trump says working on new system to ensure competition, bring down drug prices

US President Donald Trump said Tuesday that he is working on a new system that will ensure competition in the pharmaceutical industry and that drug prices "come way down." The statement comes after the president accused drugmakers earlier this year of "getting away with murder" and threatened to force companies to bid for government business.

The latest statement from Trump caused shares in drugmakers to decline, with Bristol-Myers Squibb and Pfizer both falling by around 1 percent. Meanwhile, shares in Allergan, Merck & Co. and Mylan dropped nearly 2 percent, with Eli Lilly and Johnson & Johnson's stock each slipping more than 2 percent. Further, shares in Mallinckrodt and Perrigo dropped over 3 percent.

"We are intrigued by the timing of President Trump's tweet this morning as it followed rapidly behind the House health-care reform bill, and we believe shows the administration's continued focus on drug pricing," commented Credit Suisse analyst Vamil Divan.

Trump did not provide specifics about the system or a timeline for its implementation, having previously announced in January his intention to work to lower drug prices and cut regulation to ensure that new medicines reach the market faster. Earlier this month, Trump reiterated his goal of speeding drug approvals, calling the current process "slow and burdensome."

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Analysts are unsure of what Trump's exact plan will be, with Evercore ISI's Umer Raffat noting that there is already competition between branded medicines and generic drugs. Raffat added that Medicare Part D currently includes multiple formulary tiers with branded drugs that are interchangeable, meaning they can compete against each other. "Reality is, we just don't know until something definitive is put out," the analyst said. Meanwhile, Divan suggested that lowering co-payments could be a short-term way of lowering drug costs, adding that it is unclear how Part D could be reformed since pharmacy benefit managers already provide "some competition."

For related analysis, see ViewPoints: Parsing industry's immediate reactions to President Trump's biopharma roundtable, and ViewPoints: The three arenas industry must find constructive compromise with Trump, according to buysider.

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