For much of the past half year or so, President Donald Trump was the biotech bogeyman, set to impose draconian price curbs and crush industry profits. His fear factor is rapidly diminishing.
I've previously suggested biotech investors don't take Mr. Trump's pricing threats seriously enough. But the wild inconsistency of his stances, along with Republican party divisions, have combined to make real price curbs less likely. Mr. Trump's tweets are still dangerous, but it appears increasingly likely he's just crying wolf.
One hint of the president's shrinking influence came Tuesday, when Mr. Trump tweeted he was working on a "new system" to bring competition and lower prices to the drug industry. That tweet moved the Nasdaq Biotech Index less than previous statements he has made on the issue.
The tweet might have been less impactful because, rather than touting a specific policy goal, such as Medicare negotiation, Mr. Trump merely warned of "competition." That could indicate competitive bidding for government business, but it could also refer to reducing FDA regulations to get new drugs or generics to market faster. The latter would likely not have a major impact on rising prices. Subsequent press briefings by HHS Secretary Tom Price and Press Secretary Sean Spicer did not give much in the way of clarifying detail.
A meeting Wednesday between Mr. Trump and Democratic Representatives Elijah Cummings and Peter Welch should be vastly more concerning to biotech. Mr. Cummings told reporters after the market closed Wednesday that Mr. Trump indicated support for a plan to let Medicare negotiate drug prices. Even more worrisome for drugmakers, the plan would let Medicare create a preferred drug list, or "formulary," and refuse to pay for certain drugs to increase negotiating leverage and drive down prices. Yet the NBI rose on Thursday.
Granted, this recap came from Mr. Cummings rather than Mr. Trump. But it's still surprising it didn't take a bite out of biotech.
If Mr. Trump is truly behind the Cummings plan, then it would be disastrous for the sector. The market shrug suggests investors have come to believe Mr. Trump will say whatever a given room wants to hear and that the meeting was not a serious indication of support. There's some logic to that: Pharma CEOs came away from a late-January meeting with Trump convinced direct government price negotiation wasn't a policy priority. Mr. Trump has not publicly endorsed it since.
Republicans created the law that prohibits Medicare from negotiating drug prices and are not inclined to mess with it, seeing direct negotiation as undesirable government meddling. The creation of a government drug formulary would spark even more outrage. The GOP's eight-year promise to repeal and replace Obamacare is tottering zombie-like toward inevitable death in the Senate due to internecine Republican conflict. That doesn't suggest an environment conducive to Trump's administration introducing a policy most of his party would hate.
Mr. Trump has reportedly told conservative leaders a second wave of GOP health-care legislation may be released as soon as next week. Don't expect anything in it to look much like the Cummings plan.
Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.