‘They’re getting away with murder,’ said President-elect Donald Trump at last week’s epic news conference.
No, he didn’t mean Russian hackers. He was talking about red-blooded American drug companies.
Trump went on: ‘Pharma has a lot of lobbyists and a lot of power, and there is very little bidding. We’re the largest buyer of drugs in the world, and yet we don’t bid properly, and we’re going to save billions of dollars.’
That last part isn’t quite correct, though.
Trump said there’s ‘very little bidding’ when the government buys drugs. In fact, there’s no bidding at all when Medicare buys prescription drugs. The Bush-era legislation that created Medicare Part D bars the government from negotiating lower prices, despite it being the drug industry’s biggest customer by far.
That’s one reason pharmaceutical and biotechnology stocks performed so well in the last decade. And it’s why the prospect of losing that advantage pushed those sectors lower.
However, the Trump-inspired loss is actually minor compared to what another president once did to drug stocks. The dot-com bubble has some lessons we best not forget.
This post was published at Mauldin Economics on JANUARY 17, 2017.
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