Biotechnology stocks and sector-related exchange traded funds retreated Tuesday after President-elect Donald Trump vowed to “bring down drug prices.”
The iShares Nasdaq Biotechnology ETF (NasdaqGM: IBB), the largest biotech ETF by assets, declined 3.3% Tuesday, falling back below its long-term, 200-day simple moving average.
IBB has rebounded 9.0% over the past month after Trump won the presidential election on speculation that he would not focus on the rising drug prices in the healthcare sector, but the hopes were quickly dashed on Tuesday.
“I’m going to bring down drug prices. I don’t like what’s happened with drug prices,” Trump said, according to a transcript of an interview posted on Time’s website.
During the presidential campaigns, biotechnology and pharmaceutical companies like EpiPen allergy shot maker Mylan NV and Valeant Pharmaceuticals International have come under fire over their high drug prices, following Hillary Clinton’s censures.
While Trump was expected to be a proponent to free-market health care, drug company executives and observers warned that the President-elect could scrutinize prices as a populist issue.
Allergan Plc Chief Executive Officer Brent Saunders told an investor conference that Trump could end up being more “vicious” on pricing than Clinton and cautioned that the industry has a “false sense of relief.”
“It’s not a new position for (Trump),” Jeffrey Loo, health-care equity analyst at CFRA Research, told CNBC. “The fact that he reiterated his position again made investors nervous about his position on price controls. … Outside of the comments he’s made about drug prices there’s so much uncertainty about the (Affordable Care Act) and what the Trump administration could do.”
A few drug CEOs have come out to state they are not aggressive price takers. For instance, Merck & Co. CEO Ken Frazier said that the company has refrained from raising costs of its medicines.
For more information on the biotech sector, visit our biotechnology category.