The United States has the highest prices for pharmaceutical drugs anywhere on earth. The U.S. government doesn’t regulate or negotiate the prices of drugs in the market, which enables drug makers to set their own prices. The president of the United States, Donald Trump, has raised his voice regarding this issue since he took office in November 2016. His frequent comments on lowering drug prices have resulted in anxiety among the pharma industry regarding the outlines of his ‘soon-to-be-released’ policy; that has the potential to change the healthcare system in the United States for better or for worse.
The freedom of drug companies in the U.S. has bothered Trump since he took office. In serval press conferences, he claimed on bringing down drug prices in the U.S., making them more affordable to the poor and needy. Like many of Trump’s claim, the reality of this happening can be questioned. However, the secretary of Health and Human Services, Alex Azar, has confirmed that the entire healthcare system is under review. The new policy, which aims to reduce the cost of over-the-counter drugs and prescription medication, will have an adverse effect on pharmaceutical and insurance companies alike.
On 9th July, Trump took a stab at New-York based drug giant, Pfizer, via Twitter. In his Twitter rant, he claimed to respond to Pfizer’s decision to raise drug prices in the U.S. while lowering them for Europe. In response, the drug giants temporarily rolled back their prices to give Trump time to work on his healthcare blueprint.
Trump’s rants have a proven track record of swaying the market. Previously, when he tweeted statistical data about new American jobs, the Dow Jones Index fell down by 1175 points. Similarly, the tweet about Pfizer also drove the Pharma Stock market down.
The effects of Trump’s tweet are also reverberating across the world, with stock prices of pharmaceutical companies taking a dip worldwide. In India, the NIFTY Pharma Index dropped by 2.6% on 16th July. India’s pharmaceutical sector is the sixth largest in the world, accounting for around 3.5% of the global industry in value terms and 10% in volume terms. Previously, the fourth quarter of the financial year 2017-18 saw a decline in revenues generated by pharmaceutical companies. While India’s operating environment was kept tough by pricing controls, pharma companies with strong brands in the over-the-counter category are better placed to rise the slowdown.
In addition to Trump’s ongoing rhetoric, the regulations by the U.S. Food and Drug Administration (USFDA) might also have an impact on the pharma stock worldwide. It has shown reluctance to release new products in the market due to lack of additional documentation required for elemental impurities. Also, it has prioritized approving new low-cost generic drugs in the market, which has reduced the stock prices for specialized drugs that are usually sold by a doctor’s prescription.
Nonetheless, as the Trump administration plans on reducing drug prices, pharma companies wait with anxiety. Spencer Perlman, director of health-care research at Veda Partners, has stated the drug price mention to be “more bark than bite”. As the Pharmaceutical Research and Manufacturers of America (PhRMA) spent $25.4m lobbying the US Congress, their foothold on any political decision being made is strong. While supporters of U.S. pharmaceuticals flexible pricing system argues that such freedom ensures profit and brings in investment, Trump’s blueprint might wreak havoc not only on the U.S. drug companies but also worldwide.