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New York • Up went the tweet, and down went drug company stocks.
Just before the stock market opened on Tuesday, President Donald Trump said he is working on "a new system" to reduce prices. He also said he'll bring "competition" to the drug industry. It's not the first time comments from Trump have had a big effect on pharmaceutical stocks: he hasn't gotten into specifics and investors aren't sure how committed he is to doing something.
In January Trump accused drugmakers of "getting away with murder" on drug prices, and pharmaceutical and biotech stocks fell sharply. Less than three weeks later, he held an apparently friendly sit-down with industry executives at the White House and said he wants to speed up the drug approval process, which could bring costs down for drug companies. The stocks moved higher afterward.
"We certainly lack the understanding of what he wants to do," said Les Funtleyder, health care portfolio manager for E Squared Asset Management. "He keeps making conflicting statements it's hard to really pin him down."
Some of the biggest losses Tuesday went to biotechnology companies, which make drugs that are complicated to engineer and can be extremely expensive. Companies that make generic drugs, generally the least costly pharmaceuticals, also traded lower. Several generic drugmakers are under scrutiny over allegations of price-fixing.
Democrats and a few Republicans in Congress have some ideas that are aimed at reining in drug prices, both before and since Trump's election. They've proposed letting patients import medicines from Canada, where government price controls keep costs much lower, and allowing the federal Medicare plan to negotiate prices for the drugs it buys for seniors.
But bills containing those ideas haven't gone anywhere. That's mainly because of opposition from Congressional Republicans and pressure from the pharmaceutical industry, which is among the top spenders on lobbying Congress.
Top drugmakers have argued for years that any type of price controls would crimp innovation because research is so expensive. Their trade groups are running tear-jerker ad campaigns touting how new drugs help patients with awful diseases.
Patients and politicians have blasted drugmakers over soaring drug prices in the past, but this round of criticism is more intense and it has lasted almost two years.
A key reason is that insurance plans have shifted a bigger portion of drug costs onto patients, and many now have high-deductible plans requiring them to spend thousands of dollars before coverage kicks in.
Meanwhile, prices for many new drugs now top six figures a year, and the prices of older drugs can quickly double or triple thanks to repeated price hikes. Several companies have been called out by Congress for price-gouging on products with little competition, such as Mylan's EpiPen.
Trump's proposal about speeding up drug approvals has detractors, too. Analysts say there's no reason believe faster approvals would bring lower initial prices for drugs.
Jim O'Neill, who Trump has nominated to lead the Food and Drug Administration, once proposed that drugs be allowed on the market once it's determined they are safe but before they are proved to work.
Drugmakers oppose the idea, saying that not determining drugs' effectiveness would create confusion for doctors and patients and make it difficult to get insurers to cover those unproven drugs.