Drug Stocks Fall on Trump's Price Control Orders

The executive orders seek drug price reductions. But it's unclear if they'll have much impact, given the limited power of such orders.
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Drug company stocks fell Friday ahead of executive orders from President Donald Trump that seek to limit drug prices.

Trump has been complaining about high drug prices since his 2016 presidential campaign, and promised to achieve cuts since he came into office.

But nothing has happened yet, and healthcare appears to be a vulnerable issue for Trump in this year’s campaign.  

The four orders announced after the closing bell seek to limit drug prices through rebates and tying prices to costs paid abroad. Still, executive orders have constraints and may have limited power to affect drug pricing in the end.

One of the orders would make it easier for states to allow some cheap drugs to come here from Canada. Drug companies are adamantly opposed to importing cheaper drugs from abroad,  The order would resurrect the administration’s proposal on the issue from last year.

Another order would create an “international pricing index” to keep Medicare drugs prices in line with those of countries that have much lower prices, the so-called  “most favored nations” clause. But drug companies and much of the GOP don’t like the idea, viewing it as socialistic price fixing.

Some analysts have speculated that all the work drug companies are doing to come up with vaccines, treatments and tests for the coronavirus has bought them good will with Congress, which may work to prevent legislators from enacting price controls.

As for drug stock moves Friday, Pfizer  (PFE) - Get Report shares fell 2%, Amgen  (AMGN) - Get Report fell 1.7%, AbbVie  (ABBV) - Get Report fell 1%, and Eli Lilly  (LLY) - Get Report was down 1.2%. 

The Invesco Dynamic Pharmaceuticals ETF  (PJP) - Get Report fell 1.6%. 

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