Drop in Pharma shares after the announcement by Trump regarding the preparation of executive order

There was a drop in the shares of the pharmaceutical firms on 5th of July after the American President stated that his administration is working on an executive order which would be requiring the drug firms to charge their medicines based on the lowest amount paid for the same drug by another nation.

SPDR S&P Pharmaceuticals, which is an exchange-traded fund that tracks the stocks of topmost pharmaceutical firms, dropped 1.6% on the 5th of July. The index started declining right after Trump told the reporters on the White House lawn regarding preparations for the executive order.

Trump stated that we are going to be announcing something very soon: a favored nation’s clause. As you are aware, for several years, other nations have been paying less for the drugs than we do. At times by 60 to 70%. Right now we are working on it, we are working on a favored nation’s clause, where we would pay whatever the lowest nation’s price is. Why should any other nation like Canada be paying any less than us? They have taken benefit of the system for a long time, pharmaceuticals.

He said that they will do this in the form of an executive order.

In October 2018, the President made an announcement about a new rule which would bring the prices of Medicare pays closer to that of other countries & save taxpayers an anticipated $17.5Bn over the next 5 years. This rule was revealed by the President after the Department of Health & Human Services released a report on the prices of drugs under Medicare Part B, which projected that the US is paying on average nearly two times what other countries are paying.

This proposal was titled as the International Pricing Index.