Facing Pressure from Trump, Drugmakers Still Rack Up Big Profits
Health Care

Facing Pressure from Trump, Drugmakers Still Rack Up Big Profits

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The health care industry is making some healthy profits. Axios’ Bob Herman reports that, with the second-quarter earnings season mostly over, the sector “has already banked more profits than any other quarter in the past year,” with companies’ results regularly topping Wall Street expectations, helped by the corporate tax cuts passed into law last year. Most companies have also raised their earnings estimates for the rest of the year.

The big numbers: As of Thursday, 85 health care companies had reported $47 billion in profits on $545 billion in revenue for the April – June quarter.

Pharma stands out: Drug companies continue to post the largest profit margins in the sector. Will that change at all after Pfizer and nine other drugmakers announced recently that they would temporarily roll back some recent price hikes or freeze prices (after some public shaming by President Trump)? The financial impact of those pricing announcements won’t be seen until future earnings periods, but as Politico reports, the moves are widely seen as “largely symbolic.” One drug lobbyist describes them as “nothing-burger steps” that nevertheless “give the administration things they can take credit for.”

Perhaps there’s some value to the symbolic gestures. “Glass half full says we have never before seen pharma promise not to raise prices anymore. So this is a step forward — including for patients,” Walid Gellad, director of the Center for Pharmaceutical Policy and Prescribing at the University of Pittsburgh tells Politico. “Glass half empty is that these are token measures — either on drugs few people use, or drugs that just had their price raised, and that prices will just go up next year."

The Trump factor: The president is reportedly very focused — or even fixated — on drug prices, regularly raising the issue with Health and Human Services Secretary Alex Azar and others in the administration. “He sees the issue as a political winner, especially among his conservative — and largely older — base, which relies heavily on prescription drugs,” Politico reports, before offering this devastating peek into the drug industry’s thinking:

‘There is a real fear that Trump only understands things very simplistically,’ said a lobbyist for several drug companies. ‘So they want to keep tossing treats for him or he will go after blunt instruments,’ like government drug price negotiations — steps neither the conservative leadership at HHS nor the drug industry want.

Why it matters: While health care companies are making large profits, drug prices remain a major concern for Americans — and are set to be a major issue in the upcoming elections. A new polling memo from Priorities USA, a Democratic Super PAC, reports that nearly two-thirds of Americans say that the cost of health care is getting worse. And analysts question whether the Trump administration’s 44-page blueprint for lowering drug prices will have significant long-term effects. Meanwhile, Democrats see an opportunity, as Priorities USA lays out in its memo, to hammer congressional Republicans and the Trump administration for “giving large tax cuts to drug companies and health insurance companies while allowing them to raise drug prices and insurance premiums without any limits.”

Read Politico’s piece: “How drug companies are beating Trump at his own game”