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Pharma Stocks Slide as Trump says the Industry is ‘Getting Away with Murder

Pharma Stocks Slide as Trump says the Industry is ‘Getting Away with Murder
Drugs stocks were sent sharply lower after U.S. President-elect Donald Trump promised to change the pharmaceutical companies’ policy and rate of what they charge the government for medicines and said that the companies are "getting away with murder".
After his remarks at a news conference spooked investors, the benchmark S&P 500 index slipped into negative territory.
"When the president-elect says we're going to negotiate drug pricing, you have to take that seriously, but at the same this is a complicated issue because there's not going to be clarity on drug pricing reform anytime soon," said Brad Loncar, manager of the Loncar Cancer Immunotherapy ETF. "When somebody that high profile says something that negative, people do not want to invest in it."
Trump has made only a few public statements about drug pricing since being elected even as he had blasted other industries for charging the government too much, particularly defense companies. He promised a border tax for companies producing products for U.S. consumers outside the United States and briefly mentioned Lockheed Martin Corp, Ford Motor Co, and United Technologies Corp during the news conference.
Referring to tax issues with Amazon, back in May, then-candidate Trump said Amazon was also "getting away with murder." Even though Amazon’s stock is up almost 12 percent since Trump's remark, it had fallen as much as 4 percent in the next few days.
The ARCA pharmaceutical index gave up as much as 2.6 percent and ended the day down 1.7 percent after his promise to bring down drug spending.
After sharp increases in the costs of some life-saving drugs drew scrutiny in the press and among lawmakers, the drug industry has been on edge for two years about the potential for more government pressure on pricing. For instance, Medicaid and Medicare are being investigated on Mylan NV's) allergy treatment EpiPen by the government.
Investors suffered from share drops when Democrat Hillary Clinton campaigned against healthcare cost increases and negative comments on drug pricing trigger selling both from algorithms and investors, said David Katz, chief investment officer at Matrix Asset Advisors in New York,.
The law currently prohibits Medicare healthcare program to negotiate with pharmaceutical companies and Trump's campaign platform included allowing exactly this. Making it easier to import drugs at cheaper prices has also been discussed by him.
"We are going to start bidding. We are going to save billions of dollars over time," Trump said.
$325 billion on medicines in 2015 was spent on Medicare, which covers more than 55 million elderly or disabled Americans.
"Medicines are purchased in a competitive marketplace where large, sophisticated purchasers aggressively negotiate lower prices," said industry trade group Pharmaceutical Research and Manufacturers of America, or PhRMA President Stephen Ubl.
The industry is "committed to working with President-elect Trump and Congress to improve American competitiveness and protect American jobs," he said.
 Roche Holding AG focuses on innovation and investing in research, said Roche Pharmaceuticals CEO Daniel O'Day, in an interview at a JPMorgan conference in San Francisco.
When Mylan CEO Heather Bresch was asked during an investor presentation at the same conference, she said it was premature to respond to Trump's comments. As the government repeals the Affordable Care Act, how healthcare is set up has to be looked at again, she said.

Christopher J. Mitchell

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