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European Drug Stocks Hit, Even as Trump Price Plan Seen as Noise

European Drug Stocks Hit, Even as Trump Price Plan Seen as Noise

(Bloomberg) -- Health care was the worst-performing sector in European stocks Monday after Donald Trump hinted at his latest plan to cut drug prices in the U.S., even as analysts and traders largely dismissed the remarks as vague political noise.

“It’s a nice idea but in practice it’s quite a different thing,” said Andrew Keith, responsible for health care equity sales at Cantor Fitzgerald Europe, after the U.S. president vowed to introduce a “favored-nations” policy that would allow the U.S. to buy drugs based on the lowest prices paid by other countries.

The Stoxx 600 Health Care Index fell 0.7% at 12:40 p.m. in London, while the broader benchmark was little changed.

A complex system whereby powerful insurance companies sit between the government and drugmakers, further complicated by rebates, means “there’s no easy fix” for the White House to reduce costs, Keith added by phone.

“We lack details on what an executive action would involve, including which government programs, types of drugs, country benchmarks and roll-out timing,” Morgan Stanley analysts including David Risinger said in a note to clients.

“Most importantly, ‘favored nation’ pricing may be easier said than done,” they added, as other countries “may be motivated to obfuscate future disclosing of net pricing” amid concern that manufacturers could raise prices against them to close the gap with the U.S.

But despite commentators pouring cold water on Trump’s remarks, companies that get a high percentage of sales from the U.S., such as insulin maker Novo Nordisk A/S and oncology powerhouse AstraZeneca Plc, led declines in pharma shares.

European Drug Stocks Hit, Even as Trump Price Plan Seen as Noise

--With assistance from Lisa Pham.

To contact the reporter on this story: Joe Easton in London at jeaston7@bloomberg.net

To contact the editors responsible for this story: Beth Mellor at bmellor@bloomberg.net, Phil Serafino, Jon Menon

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