• Shares in nearly all major drugmakers lost value Monday, a market reaction that suggest the industry is taking seriously the prospect of new action on drug pricing from President Donald Trump.
• Among large pharmaceutical companies, only Johnson & Johnson and Novartis ended the day’s trading in the green. On Friday last week, Trump said his administration was working on an executive order to ensure what the U.S. pays for drugs is no higher than that paid by other nations. 
• A Monday evening decision by a federal judge to strike down a Trump administration rule requiring drug companies list their prices in television ads, however, offered some reprieve, helping biotech and pharma stocks recover on Tuesday morning. The rule had been set to take effect this month. 

While the intent of Trump’s comments weren’t clear, the market reaction Monday certainly was.

Most smaller biotech companies lost value, as did 25 of 27 biotech and pharma companies worth more than $10 billion by market capitalization, continuing a slide which began Friday following the remarks by the president.

The Dow Jones industrial average fell by about half a percentage point Monday, as markets weighed the likelihood of interest rate cutes in the near future, whereas 21 of that group of large drugmakers experienced steeper declines. 

Although smaller biotechs can be hit harder in market sell-offs, the reactions in shares of pharmaceutical companies or stable biotechs is more likely attributable to concern over new drug pricing action. 

According to a White House transcript, Trump’s comments on the issue came in response to a press question on rural broadband use, from which he quickly pivoted.

“We’re going to be announcing something very shortly — a favored nations clause,” the president said. “As you know, for years and years, other nations paid less for drugs than we do — sometimes by 60, 70 percent.” 

“We’re working on a favored nations clause, where we pay whatever lowest nation’s price is,” he added. 

What Trump exactly meant isn’t certain, given the administration is also working on a proposal to link prices for certain doctor-administered drugs under Medicare Part B to prices in select foreign countries.

A spokesperson for the Health and Human Services Department referred questions on specifics to the White House, which didn’t respond to BioPharma Dive’s request for comment. 

Analysts on Wall Street had varying interpretations of Trump’s remarks, with those at RBC viewing the comments as “political rhetoric.” Others guessed the president might also be referring to the international pricing index proposal that currently under review at the White House.

Slated to take effect in early 2020, the rule would only apply to a subset of drugs and, if finalized, would come under the framework of a pilot program. 

Yet some had a more bearish take. 

“At minimum, this will be an effective negotiation tactic to extract concessions from pharma,” wrote Ronny Gal, an analyst at Bernstein, in a July 8 note to clients. “At the high end, it could have a broad and material earnings impact.” 

Drug prices have come up in recent Democratic presidential debates and a number of companies took the industry’s usual July 1 price hikes, perhaps putting the issue back in the spotlight. 

The Washington Post recently reported Trump had expressed frustration to staff at the lack of progress on drug pricing.