It’s been a mixed week for the health care space indeed.
After months of behind the scenes political posturing, the Trump administration walked back one of its key planks in trying to reduce drug prices. The Department of Health and Human Services said Thursday it would no longer pursue a rule prohibiting rebates on drugs found in Medicare Part D and Medicaid plans.
Trump had been targeting the drug middleman such as CVS Health (CVS) and Cigna (CI) —which operate vast pharmaceutical benefit managers (PBMs) — that many see as a prime reason for higher prescription drug costs. Under Trump’s scheme, the drugmakers would give discounts to consumers as opposed to the PBMs.
But it looks like the powerful lobbyists behind the PBMs got their wish, for now.
“Clearly as an industry and as a representative of a very large pharmaceutical company we are very disappointed,” Ruud Dobber, AstraZeneca’s biopharmaceuticals president, said on Yahoo Finance’s The First Trade moments after the news hit the wires. “Removing the rebates was one of the options in order to reduce the out-of-pocket costs for many patients in the United States. So, it’s a clear disappointment.”
Dobber added, “Hopefully the administration will be open to other solutions to prevent high out-of-pocket costs for patients.” The long-time health care executive said AstraZeneca usually takes minimal price increases as a matter of philosophy.
“We are sensitive to the fact that out-of-pocket costs are surging for many patients in the United States and that’s an unsustainable situation,” Dobber said.
While AstraZeneca (AZN) may be let down by Trump & Co., health care stocks such as UnitedHealth (UNH) and Cigna rallied hard on the news. The iShares U.S. Healthcare ETF (IYH) has gained a solid 2.7% this week, outperforming the S&P 500’s 1% advance.