The biotech industry is sizing up Donald Trump as a potential regulator-in-chief, trying to divine what he might do about rising drug prices and other issues.
Industry leaders were as surprised as anyone by Trump’s victory, which set off a relief rally in biotech shares Wednesday. While drug makers were a target of criticism during the presidential campaign, most frequently by Democrats Hillary Clinton and Vermont Sen. Bernie Sanders, no one expects the drug-price backlash to disappear under the Republican.
“There’s going to be a lot of pressure,” said Bob Coughlin, president of the Massachusetts Biotechnology Council, the state’s industry trade group. “The pressure regarding prices is not going away and, with the Trump administration, people are going to expect change. So we have to be at the table to offer solutions” on new drug pricing structures.
Trump certainly wasn’t considered a friend of the drug industry on the campaign trial, where he denounced industry lobbyists and said his rivals were “all taken care of by drug companies.” But his criticism of the industry carried less sting — and his proposals to curb rising prices were typically more vague — than those of Clinton or Sanders.
At times, Trump called for letting consumers import lower-priced drugs from overseas and suggested that Medicare be allowed to negotiate drug prices for seniors, two proposals that drug makers strongly oppose. At a rally in Manchester, N.H., last February, he said he could save the government $300 billion a year negotiating drug prices with companies.
For the biopharma sector, the first order of business may be reputation repair by voluntarily moderating prices and shaping “value-based” price contracts with health plans to fend off federal price controls, said Leora Schiff, principal at Altius Strategy Consulting in Somerville
“This industry’s got to start paying a lot of attention to their reputation,” Schiff said. “They took a big hit this year, and they can’t afford to further damage their public good will. If people feel their drugs are great but they’re ruining us financially, that’s going to cause further damage.”
Biotech investors, though, were betting Wednesday that Trump’s election will reduce pressure on the industry to curb rising drug prices.
The benchmark Nasdaq biotechnology, which declined last month on fears that the Democrats would control both the White House and Congress, shot up nearly 9 percent.
Shares of large biotech companies in Massachusetts, a hub of the life sciences business, also rose. The stock price of Cambridge’s Biogen Inc. climbed 8.2 percent, while Boston-based Vertex Pharmaceuticals Inc. powered up nearly 12 percent. Many smaller biotech shares also fared well. Chiasma Inc. of Waltham closed up more than 13 percent.
Cambridge cancer drug maker Ariad Pharmaceuticals Inc., which temporarily lost 15 percent of its value after an Oct. 14 tweet by Sanders denounced its “greed” for boosting the price of a leukemia drug, finished up 23.2 percent.
Investors clung to the belief that pressure on the industry could be less intense than it would have been under a Democratic administration. Some ideas proposed by Democrats, such as reducing market exclusivity periods for new medicines, may be less likely now.
There were also hopes that a Trump administration would limit business regulation more broadly and enable a tax holiday allowing drug makers and other companies to “repatriate” money parked abroad, which is now subject to taxes if it is put to work in the United States.
The defeat of Proposition 61, a California ballot measure to limit drug prices for 4.4 million residents insured by state agencies, buys the industry time to work with health insurers and other parties on value-based contracts tying prices to how well drugs work. The proposal, called the California Drug Price Relief Act, was rejected 53.8 percent to 46.2 percent.