Healthcare stocks are in rally mode today after top pharmaceuticals CEOs met with President Trump at the White House this morning. Shares of the Healthcare Select Sector SPDR (XLV) are up by 1%, while the iShares NASDAQ Biotechnology ETF (IBB) is trading up by 1.75%. The sector is in rally mode following some positive comments from the president in the meeting.
Trump favors a much faster FDA approval process, regulation cuts, and ending freeloading on foreign price controls. He also wants to get the prices of drugs down and have greater domestic drug manufacturing.
This is not that different from my expectations going into 2017. My opinion has been that the best way to fight drug pricing issues is to spur competition and cut regulations. The idea of capping prices, or the amount a company can increase its prices, seemed excessive. (See also, Healthcare Sector Glad 2016 is Over)
The industry, which has been uncertain about how drug pricing would be dealt with by the new administration, appears to be showing sigh of relief, and you can see the market is responding favorably. I believe it is important to incentivize companies to develop new drugs, not punish them. From my perspective, the benefits many of these drugs provide far outweigh the costs.
If anything, today's news should help to remove the cloak of uncertainty. Talk is talk, and we will need to see the action that is taken and what regulations get cut, but it would seem today's meeting is a step in the right direction for the pharmaceutical industry.