"The U.S. drug companies have produced extraordinary results for our country, but the pricing has been astronomical," President Donald Trump asserted in a speech back in late January. Throughout much of his campaign, Trump repeatedly slammed the pharmaceutical industry for inefficient practices, overregulation, and high drug costs for consumers. In the same speech, Trump claimed that he would, "oppose anything that makes it harder for smaller, younger companies to take the risk of bringing a product to a vibrantly competitive market. That includes price-fixing by the biggest dog in the market, Medicare, which is what's happening. But we can increase competition and bidding wars big time, we have to, into that program." Pharmaceuticals were a substantial issue for Trump on the campaign trail, but what has his impact actually been on the industry over the past several months?
This lack of understanding was evident in Trump's healthcare bill: the American Health Care Act (AHCA). The bill sought to drastically reduce the federal government's involvement with regards to healthcare, but also contradicted several promises Trump had made to his constituents. The bill only offered the uninsured $2,000 in tax credits for medical expenses, sought to eradicate Medicaid, allowed health insurance providers to opt out of certain requirements that are currently mandated under the ACA, and required health insurance providers to impose a 30 percent surcharge on premiums for individuals who do not have continuous coverage. In short, it would actually undermine poor and middle class individuals currently protected under the ACA while simultaneously seeking to cut off some of the consistent cash flow currently provided to insurance companies. This would, in turn, lead to widespread insurance losses. The bill did not work in anyone's favor with the exception of the wealthy, who would receive a tax cut on payroll taxes for their employees.
Trump's predecessor, President Barack Obama, passed the nation's first attempt at universal healthcare coverage back in 2010. The Affordable Care Act (ACA) sought to increase coverage without regard to preexisting conditions, lower premiums, and increase the quality of healthcare available to Americans of all socioeconomic strata. Though the bill had excellent intentions, it actually led to an increase in healthcare premiums for many working and middle class individuals. The bill relied on younger, healthier individuals entering the workforce to subsidize the cost for older Americans. As many young adults chose to opt out of the program, costs increased to cover the medical expenses of elderly individuals who would have previously been denied healthcare. The ACA was, as stated in Forbes, "a money printing machine for the healthcare industry," or, more specifically, health insurance providers like Aetna (NYSE:AET). Under the ACA, the value of Aetna's stock increased by 360 percent.
This bill was clearly a partisan effort to undermine the ACA, not actually create a better or more efficient healthcare system; many Republicans who voted in favor of the ACA admitted that they had not even actually read the bill. The AHCA ultimately failed to pass, and hospital stocks actually skyrocketed in value in the immediate aftermath of the bill's demise: Fortune noted that "Tenet Healthcare (NYSE:THC) is up 7%, HCA Holdings (NYSE:HCA) has spiked 5.5%, Community Health Systems has risen more than 4%, and rural care provider LifePoint Health is up more than 3%." It seems, then, that it is actually the demise of Trump's policies that positively impact the market in favor of healthcare.
In light of Trump's rhetoric, healthcare companies were increasingly nervous about policies that would actually be implemented during his presidency. Even prior to his inauguration, CEOs from companies such as Pfizer (NYSE:PFE), Johnson and Johnson (NYSE:JNJ), and Gilead Sciences (NYSE:GILD) were already publicly speculating about the ways in which Trump might seek to lower drug costs. Kathleen Sebelius, former Secretary of Health and Human Services, noted that the federal government does not actually have the power to limit pricing or restrict patent laws in the way Trump had discussed. She stated that she was "baffled" and had "no idea what it is that is intended to actually cause drug prices to go down." Trump's hostility towards the pharmaceutical industry has led to dips in stock value, with Fortune noting in March that, "major biotech stock indices like the NASDAQ Biotechnology Index and the S&P Biotech ETF fell anywhere from 1.8% to 3.5% in early Tuesday trading following the president's latest comments slamming high drug prices."
Trump introduced several ideas to impact drug prices, such as allowing drugs to be introduced to the market prior to their approval by the Food and Drug Administration (FDA) or taking a more isolationist approach to healthcare and actively stopping the flow of pharmaceuticals manufactured abroad. However, these proposed solutions tackle symptoms of an overarching issue: as highlighted by the passage of the Affordable Care Act, healthcare prices are kept high as a result of age-related illness. The average lifespan for Americans is increasing and the Baby Boomer generation, the second-largest generation in American history, is now reaching retirement age. Healthcare providers must provide more extensive treatments for a larger pool of people than they had been expected to previously. Simply undermining the authority of the FDA does nothing to address the reality of an aging population.
This lack of understanding was evident in Trump's healthcare bill: the American Health Care Act (AHCA). The bill sought to drastically reduce the federal government's involvement with regards to healthcare, but also contradicted several promises Trump had made to his constituents. The bill only offered the uninsured $2,000 in tax credits for medical expenses, sought to eradicate Medicaid, allowed health insurance providers to opt out of certain requirements that are currently mandated under the ACA, and required health insurance providers to impose a 30 percent surcharge on premiums for individuals who do not have continuous coverage. In short, it would actually undermine poor and middle class individuals currently protected under the ACA while simultaneously seeking to cut off some of the consistent cash flow currently provided to insurance companies. This would, in turn, lead to widespread insurance losses. The bill did not work in anyone's favor with the exception of the wealthy, who would receive a tax cut on payroll taxes for their employees.
This bill was clearly a partisan effort to undermine the ACA, not actually create a better or more efficient healthcare system; many Republicans who voted in favor of the ACA admitted that they had not even actually read the bill. The AHCA ultimately failed to pass, and hospital stocks actually skyrocketed in value in the immediate aftermath of the bill's demise: Fortune noted that "Tenet Healthcare (NYSE:THC) is up 7%, HCA Holdings (NYSE:HCA) has spiked 5.5%, Community Health Systems has risen more than 4%, and rural care provider LifePoint Health is up more than 3%." It seems, then, that it is actually the demise of Trump's policies that positively impact the market in favor of healthcare.