TOKYO – The stocks of Japan's biopharmaceutical companies have taken a hit since U.S. President Donald Trump said, almost two weeks ago, that pharma companies have been "getting away with murder." Unlike their U.S. counterparts, Japanese stocks have not recovered from that significant broadside.
Trump's comment on Jan. 11 that the U.S. might "create new bidding procedures for the drug industry" and would "save billions of dollars over a period of time" pushed down prices of shares in the sector not only in the U.S., but also abroad in Japan. (See BioWorld Insight, Jan. 23, 2017.)
Trump's announcement Monday that the U.S. is withdrawing from the Trans-Pacific Partnership (TPP) did nothing to calm Japanese fears. Although the trade agreement was finalized in 2015 under the Obama administration, both Democrats and Republicans in Congress had refused to ratify it.
Trump's executive action was not unexpected, but it is a signal to global markets that he meant what he said during the election campaign about withdrawing from trade deals that he thinks disadvantage U.S. companies.
In announcing the withdrawal, Trump called the agreement a disaster and a rape of U.S. interests. For instance, one of the provisions of the TPP targeted the 12-year market exclusivity granted to biologics under the U.S. Biologic Price Competition and Innovation Act. While it didn't change the exclusivity in the U.S., which is the longest in the world, the TPP called for five to eight years of exclusivity in other countries, including Japan, that are party to the agreement. (See BioWorld Today, Oct. 6, 2015.)
Maintaining that trade agreements had to coincide with U.S. law, U.S.-based drug companies objected to the provision, fearing that, if ratified, it would give Congress the flexibility to reduce the 12-year biologic exclusivity in the future – something Obama and some lawmakers pushed for several years in an effort to hasten biosimilar competition and reduce drug prices.
With Trump's comments on Jan. 11, Tokyo-listed Takeda Pharmaceutical Co. Ltd. (TYO:4502) began a slide of more than 5.4 percent that has taken its shares down to ¥4,707 (US$41.42) as of Jan. 23. Another Tokyo-listed company, Daiichi Sankyo Co. Ltd. (TYO:4568) lost 1 percent on that day and has fluctuated but is now down almost 2 percent. Astellas Pharma Inc. (TYO:1530) has plummeted 8.3 percent since Trump's comments and is now trading at ¥1,530 (US$13.46). Shionogi & Co. Ltd. (TYO:4507), which makes everything from pharmaceuticals to medical devices, lost 3.7 percent on a single day and is still down.
Fumiyoshi Sakai, a pharmaceutical senior analyst at Credit Suisse Securities (Japan) told BioWorld Asia. "He [Trump] can [also] threaten the companies with heavier taxation, leading to the question of where to invest in the future."
Sakai suggested that setting up factories in the U.S. may generate a few advantages for individual pharmaceutical companies or the industry as a whole. "The government cannot intervene in the market, so Trump says he will make Medicare bid for drugs, artificially bringing the prices down, but whether that is possible or not remains uncertain. Lowering drug prices through the legal framework is questionable, as we saw in the case of the California referendum," said Sakai.
During the Nov. 8 election, voters in California also voted down Proposition 61, under which state agencies would be required to buy drugs at prices similar to those that the Department of Veteran's Affairs pays. (See BioWorld Today, Nov. 10, 2016.)
Trump has committed to bringing down drug prices in the U.S. but has not said how he intends to do that or whether patients would benefit.
"There is no point if the prices go down and health insurance companies earn more. The repeal of Obamacare will mean many will lose their health insurance, and whilst Trump says he will come up with alternatives, how he will do that is uncertain yet," said Sakai.
Japan as a drug pricing model?
Sakai said the discussion might move from drug prices to special taxation on high revenues. And here, Japan may offer up a blueprint. "The [regular] review of drug prices in Japan, in a way, is one way to do this," said Sakai.
Japan has undertaken regular price reviews of drug prices. In December, Japan's Ministry of Health, Labour and Welfare (MHLW) moved to implement an emergency 50 percent cut of anticancer drug Opdivo (nivolumab). Regulators said the move was unusual and committed to stick to its usual biennial reviews. (See BioWorld Today, Dec. 7, 2016.)
In the U.S., the ultimate implications of any changes that Trump may propose are still difficult to divine. Certainly, however, any comment he makes in the space is likely to influence companies. However, his power to bring more pharmaceutical manufacturing to the U.S. may be limited.
"As president, Donald Trump is likely to have more success in bringing down drug prices than in forcing pharmaceutical companies to reduce their offshoring efforts and re-invest in the U.S.," said Jamie Davies, head of pharmaceuticals, medical devices and health care research at BMI Research. "Foreign plants of U.S. drug makers are primarily established to serve a complex and interconnected global supply chain, and are not significant drivers of cost savings."
"Non-U.S. pharmaceutical firms, especially European and Japanese companies, also have a significant presence in the U.S., and any protectionist measures could make them reassess future investment plans."
– Regulatory Editor Mari Serebrov contributed to this story.