Just one month after his election shocker, US President-elect Donald Trump has done it again: shocked the public’s and experts’ perception of him.
After his Nov. 9 victory investors jumped out of tech stocks and flocked to banks expected to benefit from deregulation, gun-makers on the hope that he won’t curb their sales, and pharmaceutical stocks on the understanding that Trump was never going to go after them the way rival Hillary Clinton vowed to do.
A month is an eternity in politics.
On Wednesday Trump startled markets which were still in the throes of a huge stock rotation which included pharma stocks.
“I’m going to bring down drug prices,” Trump said, according to a transcript of an interview posted on Time magazine’s website as it named him its Person of the Year. “I don’t like what’s happened with drug prices.”
Trump pledged to drive down the cost of medicines, defying investors who saw a boon in his election last month and injecting himself again into a contentious economic debate.
Over the past 18 months, companies including Mylan (NASDAQ:MYL), which has been under fire for price hikes on the life-saving EpiPen allergy treatment and on Wednesday said it expected to cut 10% of its workforce in a restructuring to integrate acquisitions and Valeant Pharmaceuticals International Inc. (NYSE:VRX), down 3.5% to $15.08, have borne the brunt of public outrage over costs of medicines.
Just today in the UK drug firms Pfizer Inc (NYSE:PFE), down 1.2% to $31.19 and Flynn Pharma were fined nearly £90mln ($113mln) by regulator Competition and Markets Authority for "excessive and unfair" pricing to the state-sponsored National Health Service after hiking the cost of an anti-epilepsy drug by up to 2,600% overnight.
This month, chief executives of Regeneron Pharmaceuticals Inc. (NASDAQ:REGN), down 1.9% to $362.01 and Pfizer have been among those trying to reason with the public and explain the reasons their industry’s reputation has suffered, including the role that prices have played. A humbling experience no doubt.
But now their biggest threat and perceived guardian has joined the ranks of the masses who have become incensed by drug pricing. Trump has joined the critical chorus as bandleader.
Of the ten leading sectors of the S&P 500, the only one posting a loss on Wednesday was Health Care – down 0.8%.
Among notable standouts were Universal Health Services (NYSE:UHS), the second-biggest decliner on the S&P 500 this session, as it lost 12% to $111.36 by the closing bell.
Next biggest decliner was Endo International (NASDAQ:ENDP), down 5% to $15.09, Mallinckrodt PLC (NYSE:MNK) down 4.4% to $51.36 and Celgene Corporation (NASDAQ:CELG), down 4% to $112.66.
Mylan closed down 3.8% at $34.50 and Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) down 3.6% to $75.32.
All of it on a day when the S&P 500 struck a fresh record high and raced 1.3% higher.
Trump's comments published Wednesday were his latest swipe at American industries he views as out of line. He has named and shamed Carrier Corp. and Ford Motor Co. (NYSE:F) in efforts to keep jobs in the US, and on Tuesday singled out Boeing Co. (NYSE:BA) for the cost of replacing the Air Force One presidential aircraft.
One thing that has become apparent is that it is unsafe to simply generalise about Trump. He’s not even at the White House for another five weeks and yet his comments already carry weight.
His rationale certainly does call for restraint in portfolio re-shuffles and for most investors the comments coming from Trump in the past week have made him appear a tad unpredictable.
But there is another side to this. While talk is cheap and pledges can be made – and many have been broken by politicians through the ages – whether Trump can deliver on his declaration is another matter. Once the lobbying starts and he no longer just picks and chooses which warehouse he visits and what angle photos of his person are taken, Trump may be swayed. It is likely that he will surround himself with advisers not so much so that they carry the can when something goes wrong, but to genuinely feed him with data so that he can still take the top decisions – just like in his enterprise.
But once the advice starts to flood in, that may calm investors who were upset by today’s comments.