Pharmaceutical stocks took a hit after President-elect Trump criticized the industry during his January 11, 2017 press conference. But he also expressed support for the domestic pharmaceutical industry. What is the Trump pharmaceutical policy? We attempt to read the tea leaves.

Trump Speaks Out Against Drug Prices

President-elect Trump has not yet released a comprehensive policy statement on the pharmaceutical industry, but his statements to date give the industry cause for concern.

Item 7 in Trump’s June 2016 position on healthcare reform supports the importation of drugs from other countries, ostensibly at lower prices:

Remove barriers to entry into free markets for drug providers that offer safe, reliable and cheaper products. Congress will need the courage to step away from the special interests and do what is right for America. Though the pharmaceutical industry is in the private sector, drug companies provide a public service. Allowing consumers access to imported, safe and dependable drugs from overseas will bring more options to consumers.

As reflected in the December 2016 Time Person of the Year article, Trump raised the issue of negotiating drug prices during the Presidential campaign:

“I’m going to bring down drug prices,” he says. “I don’t like what has happened with drug prices.”

And this is what he had to say about the pharmaceutical industry in his January press conference:

I think a lot of industries are going to be coming back [to the U.S.].

We’ve got to get our drug industry back. 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 because they’re getting away with murder.

Pharma, pharma has a lot of lobbies and 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 and we’re going to start bidding and we’re going to save billions of dollars over a period of time.

In the wake of these statements, the NASDAQ Biotechnology Index dropped 3%, and Standard & Poor’s 500 Pharmaceuticals, Biotechnology & Life Sciences Index was down 1.7% (although stock prices have since been recovering).

Can Trump Bring Down Drug Prices?

According to this article from The Hill, the U.S. government is the largest purchaser of drugs through the federal Medicare program. However, as explained in this Bloomberg article, the U.S. government “is specifically prohibited from negotiating prices with drugmakers in Medicare’s drug benefit program.” Can a new Trump pharmaceutical policy bring down drug prices?

Although both Trump and GOP leadership want to “repeal and replace” the Affordable Care Act (ACA), repealing the ACA would not change the Medicare law. Moreover, it is not clear how much support Trump would have for implementing a Medicare drug price negotiation program–or which side of the aisle it would come from. Until now, it has been Democrats who supported giving Medicare the authority to negotiate drug prices. Indeed, as reported in The Hill, Kevin Brady (R-Texas), Chairman of the House Ways and Means Committee, said he would not support Trump’s proposal to allow Medicare to negotiate prescription drug prices. Of course, that was then ….

Can Pharmaceutical Companies Self-Regulate Pricing?

It is possible that Trump’s spotlight will lead pharmaceutical companies to control drug prices on their own. As reported in The Washington Post, Brent Saunders, chief executive of Allergan, vowed in September “to limit drug prices to single-digit percentage price hikes, once a year,” and Novo Nordisk made a similar announcement in November.

As reported by Reuters, following the January press conference, PhRMA President and CEO Steve Ubl stated that the industry is “committed to working with President-elect Trump and Congress to improve American competitiveness and protect American jobs.” As reported by FiercePharma, the Biotechnology Industry Organization (BIO) stated that it is “eager to discuss ways in which all parties can work together to ensure patients have access to the medicines they need, that we do not limit treatment options available for patients and that America remains the global leader in the development of innovative new treatments and cures.”

Perhaps Trump will be content to address drug prices on a drug-by-drug or company-by-company basis, similar to his recent approach to U.S. manufacturing jobs.