Donald Trump’s victory in Tuesday’s presidential election, together with the defeat of a California ballot measure, has one industry breathing a sigh of relief, at least for now: pharmaceuticals.
Shares of drugmakers rallied Wednesday on expectations that Mr. Trump’s election and Republican control of Congress would lessen the chances of government restrictions on drug prices—a prospect that seemed on the rise in response to a public backlash against escalating prescription costs over the past few years.
Mr. Trump did speak out against high drug prices at times during his campaign—including supporting allowing the Medicare agency to directly negotiate lower drug prices with manufacturers—but he didn’t propose as many specific measures against prices as Mrs. Clinton did. Analysts said price reform may be relatively low on his list of priorities.
Mrs. Clinton had proposed various measures including levying fines on drug companies that imposed unjustified price hikes, as well as capping patients’ out-of-pocket costs for expensive drugs. Those plans, and repeated promises throughout her campaign to take on drug prices, have had a chilling effect on drug stocks since she first voiced her intentions in a single tweet more than a year ago.
J.P. Morgan analysts said in a research note the election outcome “substantially diminishes the likelihood of significant pricing reform emanating from Washington.”
Mr. Trump has pledged that on “day one” of his administration he will ask Congress to repeal the Affordable Care Act. The pharmaceutical industry was broadly supportive of the law when it was passed in 2010 and has benefited from the millions more Americans who gained health insurance under its provisions.
If Congress repeals the law, legislators must replace it with “something that doesn’t cause chaos and doesn’t make things worse than they are now,” said Ron Cohen, chief executive of drugmaker Acorda Therapeutics Inc., in an interview
Despite the election outcome, the industry still has to reckon with “the very real concerns the public has” about drug prices and health-care affordability, said Dr. Cohen, who is also chairman of the Biotechnology Innovation Organization, a trade group. “Those issues have not changed substantively just because we have a new administration,” he said.
The NYSE Arca Biotechnology Index jumped 8.9%. Shares of Celgene Corp. rose 8.6%,Allergan PLC was up 8%, Pfizer Inc. rose 7%, and Gilead Sciences Inc. rose 4.4%. In Europe, Shire PLC was up 7.3%, Novo Nordisk A/S climbed 4.3% and Roche Holding AGwas up 4.6%.
Drug wholesalers and other industry middlemen also got a boost, with McKesson up 6.4% and Express Scripts up 3.4%.
The pharmaceutical industry’s main lobbying group, the Pharmaceutical Research and Manufacturers of America, issued a statement Wednesday saying it planned to work with the new administration and members of Congress to “enhance the private market, improve patient access to care and foster the development of innovative medicines.” The group said it favored changes to the U.S. Food and Drug Administration “to keep pace with scientific advances,” among other policies.
Novo Nordisk A/S, a Danish drugmaker that along with France’s Sanofi SA has faced criticism for boosting U.S. prices for insulin, said it was too early to predict how the Trump presidency would affect the industry.
“On the one hand there is campaign rhetoric, and on the other there are the issues the successful candidate prioritizes, and the need for actions to be ratified by Congress,” said a spokesman for Novo Nordisk. “We will therefore await concrete proposals.”
Fueling the rally Wednesday, the pharmaceutical industry successfully fended off a ballot measure in California aimed at curbing drug spending. A majority of voters, 53.8%, rejected Proposition 61, which would have required most state agencies to pay no more for prescription drugs than the discounted prices negotiated by the U.S. Veterans Affairs Department.
The pharmaceutical industry had spent more than $100 million on TV ads and other efforts to defeat Proposition 61, arguing it could lead to higher drug costs for many Californians. Supporters of Proposition 61, including former presidential candidate Sen. Bernie Sanders, said drugmakers are overcharging consumers for their products.
The defeat of Proposition 61 could chill efforts in other states to take aim at drug prices, said Wells Fargo analyst David Maris.
Some analysts also said the election outcome could increase the odds of a so-called holiday to allow U.S.-based multinational companies to bring back foreign earnings at reduced U.S. tax rates. That would be a boost for many pharmaceutical companies like Pfizer and Merck that have billions of dollars in profits outside the U.S. Drug makers repatriated billions of dollars during a similar holiday during the George W. Bush administration.
Evercore ISI noted that Republicans, even with a slim control of Congress, could use special budgeting rules to pass tax-reform legislation.