tv Bloomberg Markets Americas Bloomberg May 11, 2018 1:30pm-3:30pm EDT
u.s. out. speaking in florence today, he called for calm and dialogue on all sides. today,eems that screaming and shouting, insulting and bullying systematically destroying and dismantling everything that's already in place is the motive are times. mark: the out of the united states cannot undo the agreement by pulling out saying quote, this deal is not a bilateral treaty, is a un security council resolution and it belongs to the entire world. she has been reassured by iran's intentions by the declarations of president hassan rouhani and added the u.s. cannot undo the agreement by pulling out saying this deal is not a bilateral treaty, it is a un security council resolution belonging to the world. she announced she will share talks on tuesday with the british, french, german, and iranian foreign ministers in brussels trade white house chief
of staff john kelly says president trump is somewhat embarrassed by the special counsel's investigation into russian meddling in the 2016 election. probe may not be a cloud over the white house but it does get discussed. he also says he has a close relationship with the president and has never considered leaving the administration. in russia, intelligence agencies prevented a terror attack on the giant victory day parade in moscow that marked the end of world war ii. siberiaterror groups in had stockpiled weapons for the attack and russian plans -- president private -- president putin attended. reported another quarterly loss today, and the postal service says cost of health care and pension obligations outweighed strong
gains in package deliveries. the postal service has called for greater freedom to raise stamp prices to help cover costs. global news, 24 hours a day, on-air, online at tic-toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am mark crumpton, this is bloomberg. shery: i'm shery ahn. amanda: i'm amanda lang, welcome to bloomberg markets. here the top stories we are following from around the world. u.s. stocks mixed today, but major benchmarks still on track for the best week in two months. president trump called out in america auto execs saying millions more cars should be tolt in the u.s., he speaks
one of the world's largest automobile suppliers. and drug pricing also on the president's agenda today, is that to announce a plan to fight ballooning health care costs in the u.s. let's start off with a quick check of the major averages. we are seeing u.s. stocks mixed at the moment, the dow gaining for seven consecutive sessions and this would be the longest winning streak since november of last year. tech is dragging down a little bit in the broader market underperforming the broader market. index,look at biotech which is gaining ground today and investors are keeping a close eye on drug companies ahead of president trump's speech on drug prices today, though his remarks seem to be priced in. the health care index on the s&p 500 gaining ground for a third consecutive session while pharma stocks are also up and good to note that this group has been underperforming the markets and it's now trading on a five year
low of less than 14 times more than earnings. amanda: i want to take humans at the terminal here, president trump is meeting with u.s. amanda:automakers and global aus in the u.s., urging them to bring production back to the united eight. the other capacity of mexico that was really on track to hit 5 million in production of vehicles in 2018 just by way of comparison, lester the u.s. produced 11 million vehicles in canada, 2 million. 5 million makes mexico player here. we'll see what kind of assurances the president tries to ring out of automakers about where they produce these vehicles. as president trump meets with the 10 major automakers of the white house today, part of that meeting really was addressing the ongoing nafta discussions saying quote, we will see what happens and he restated his belief that this is a terrible deal. how does all of this affect nafta and the auto industry? magnalker's ceo of international.
the u.s. auto manufacturer will production out of mexico and moved it back to the eighth, i imagine you have some logistical business to do. you are located in mexico to supply them. what does it mean to you? mr. walker: everyone understands this, we need to keep nafta as a trading region against competitors like europe and asia competitive. we make it too expensive than automakers will produce around the world and each of the three areas have to be a low-cost locations of a mexico. the extent that our maker moves the assembly plant over time, a bolt of the big parts will move as well. we have over 70,000 people and it's important to get this right. been in youre place in mexico i know it's one of your most productive and efficient plants globally. the workers there made a fraction of what your canadian and u.s. workers make. the extent that our maker moves the assembly plant over on the table years this discussion point about a certain percentage of a vehicle being
made by workers earning at least $16 our and you must look at that and shiver a little bit because that would hit your bottom line. mr. walker: as a canadian, i think the objective here is not of the mexican wages are too low , is that they don't want the mexican assembly plants to go there. they come up with some way that makes it less interesting for automakers to put the assembly plants there and if they raise all the wages, that means all of the really high labor content and nobody also do here will all move back to asia, which is a lose lose. i think the objective is something that will make it more attractive. don't forget, mexico has free trade with lots of countries. its labor, but they also get to export the vehicles made their and avoid laying duties. -- paying duties. long-term, having free trade with the u.s. and europe will also help, that have a reasonable going to read it's a pretty complex issue.
shery: when it comes to a higher north american car content, that would benefit mcnabb. does that mean you support it? mr. walker: in syria benefits us because we're the biggest supplier a fairly large margin in north america. if he gets too high and carmakers say it is too costly and they can't meet it, they will just make the vehicles offshore and ship them in. it would be bad for everybody. i know the intent is there, but there's a fine line to how high you make that regional value content and i think that's understood. there's a lot of detailed discussion what has to happen to get this right. these firms love to transfer those higher cost to consumers. i think they want to transfer them immediately. one carmakers as we are going to delay it, but the price goes up and this is a competitive market.
that it's going to end up with the end consumer. we can't eat it and the car companies can't eat it and to the extent against a competitive, people won't buy cars. this could be really bad if we don't get it right and there's a lot of discussions going on and i think a lot of smart people are involved here. they understand the issues and they have been doing a great job. it will be very instant to see what happens. amanda: was interesting seeing the president using this meeting which automakers have are about fuel efficiency standards to stay -- does there want you to bring manufacturing back. how persuasive is it these days? tax reform exit popular to operate in america and politically you gain some capital. do you think he can sell big auto producers to locate in america? mr. walker: that has some influence, but at the end of the day, it's a common rusher, incentives, reducing the cost. the auto industry is very competitive and their are very
good companies emerging in places like china. if we can get nafta rights and make sure all three countries it's a win-win-win to a certain extent, we need to worry about all the vehicles made in asia and shipped over here. it's a really big competitive issue and that has to be undermined. we can fight internally, nafta has been pretty good for the automotive industry, except the assembly plants only to mexico. the need to make sure they do whatever they do, we have good trade balance and rules of a countries. key issue being discussed between president trump and auto executives as the fuel efficiency standards. the national highway traffic administration favoring freezing the u.s. fuel efficiency standards to 2020 levels. what's your view? mr. walker: everybody has their own opinion and i do believe when he to be looking at the impact of global warming and we have to look at what is the cost going to be an what's the right time to get there?
whatever the rule is going to be in north america coming up to look at what's happening in places like china and europe because most of the vehicles and the powertrains are global. i think to the extent of the consumers want to buy trucks and suvs, if you have to hit targets, then you have to make cars that they lose money on enemy wants to buy. it's a complex issue that we have to make sure we get the right people looking at it. we saw this historic move out of sedans for ford, settling down on suvs. you have to watch this closely, first of all, you were making parts for some of those cars that are being discontinued. is this an ongoing trend? mr. walker: mr. claure: automakers of --mr. walker: automakers have come to the conclusion that they have to make money and microsoft the tough decisions they have to be doing the same thing. they are doing it because they have to produce cars the public wants to buy and that's exactly
what they are doing. it's getting very costly to make small cars in north america so they make them elsewhere. government is making it less costly to make cars is good , canada has to learn from that and make sure we don't do the exact opposite. i'm not really surprised that at whatany would look the end consumer wants to buy and make that. enough don walker is not -- magna's ceo. have market insight with janus capital's george maris. this is bloomberg. ♪
amanda: this is "bloomberg markets," i'm amanda lang in toronto. shery: i'm shery ahn in new york. the dollar slipped slightly and ,oining us now is george maris great to have you with us. one sector that is very interesting as health care and pharma stocks. they are still gaining ground despite the fact that president trump will announce some play on lowering drug prices. what's going on? the investment community has known the trump was going to go after the elevated pricing in the pharmaceutical industry. that was part of his campaign speech, he reiterated that at his to the union so we knew this was going to come under attack. he clearly wants to lower out-of-pocket cost especially for seniors. he wants to introduce competition. we have seen so far say just a
few minutes before his speech are consistent with that, so getting past that is going to be a sigh of relief to the investment community. we know what's out there and it's not really worse than we anticipated. shery: earnings have been pretty good in the u.s., so when we are seeing the selloff in the market on and off, is that a sign that people are worried that this may be over? so we are done with a windfall from tax cuts and with that be the case? mr. maris: is clearly a sign that people think we are peaking and the windfall from the taxes has quit and this is as good as it gets. i think that's really wrong. what you have seen in the first quarter's earnings are coming in year-over-yearh and only 7% or 80% of that growth is fueled by the tax cuts. right now, all you have are the first or effect of the tax cut and what you haven't seen is the increased spending by
corporations and households feet into the numbers yet as a function of those tax cuts. that's going to happen, it always happens with a lag in the past it generally takes six months to 12 months for this to come through. year, second half of this you are likely to see that come in in the form of increased demand that will feed increased revenues and increased investment and will drive further growth for the corporate sector and i think that will be very healthy for earnings growth going forward. interesting point on the longtail effect of those tax cuts. one could derail that? we are watching relief in terms of how quickly the fed might need to act on rates. what really upset markets? mr. maris: does the fed become too aggressive? does inflation in the u.s. cause the fed to raise rates more aggressively than needs to and that chokes off the economic cycle?
i don't think that's likely. inflation numbers tend to be stable, there's no impetus to get aggressive. there's a lot of liquidity around all over the world whether you look at europe were china and japan, there is tons of liquidity so i don't think we are going to see a monetary restriction impact markets negatively. we will see rates rising, which could benefit financials but at the same time, you spend more and m&a. mr. maris: i think we are seeing this over and over again, there is also much ample liquidity in the system you are seeing t t logan announced every week and there is still a lot of consolidation meeting to happen. even though rates are going up from 2% daily 3% where we are in the 10 year today, it is still substantially less than we have been historically. deals can make sense and you get available atancing
a very attractive rate that will be well below what you think earnings growth is going to be. and what returns are going to be going forward. if we have normal growth and true global economic expansion and we are seeing that, these deals make sense. the cost of debt is easy to find and you are likely to go ahead and continue to have more deals occurring. give us your all caps on industrials, especially groups that have seen underinvestment that may be changing now? mr. maris: this is kind of my favorite place to invest right here and that in a lot of the mining stocks and the music industrials are out there, this is a group that for essentially the last decade has had to really exist under very tough conditions, there's been very low demand, declining need for a lot of the materials whether it's iron horse deal or copper, things of that nature have been under a lot of pressure yet these companies have survived , their operations and labor forces, now we were seeing is extremely demand for
copper, iron, aluminum, things of that nature and there's no way to get that capacity out there. it means when you have is going to be priced higher and higher and that it falls directly to the bottom line and that's likely to persist for some while and drive trim it growth in a lot of these companies. where the valuations don't apply any growth at all. that's a tremendously attractive sector. tech is underperforming in the broader market, they at --ng to fundamentals fundamentals? mr. maris: i don't think so. the tech against me and others just in a they are meeting a lot of established processes. if you are cloud or service-based, either your tremendous,th is and that looks like it will stay that way for several years going forward, i think that growth is still very scarce and it's in a
few sectors within tack and i think that is still an attractive place to be. today's momentary weakness probably isn't much of a sign of anything, it is still the best performing group year to date in the market, of over 10% of the s&p 500 and it's also the best performing group over the last couple of years. i think that's likely to continue to have a bid because that growth is so spectacular. , thank youge maris for being with us, janus capital. be closeper is said to to a deal to buy the carolina panthers nfl team and now according to sources, he could complete the transaction as early as next week. according to forbes, the panthers are worth $2.3 billion, 21st among the league's 32 teams and we are now hearing that is close on arrangement to buy the nfl's carolina panthers. president donald trump is scheduled to finally relieve his
amanda: this is "bloomberg markets," and amanda lang. shery: i'm shery ahn. than a year of attacking pharmaceutical companies and the cost of medicine, president trump is said to finally reveal his plans to decrease drug pricing. let's bring in that the opinions -- cynthia kunz. kunz: this is where we have the best idea of how it could impact drugmakers themselves and that how some of the highest priced drugs might be severed tougher negotiation and government plans like medicare and medicaid and so that's the cost of what sounds like it could happen to be impactful
drugmakers themselves. and a lot of the detail and rhetoric we're hearing is around other players in the supply chain, players like pharmaceutical benefits managers who decide how drugs get paid for, but they also get paid for that and drugmakers say they are a lot of the reason why they keep prices so high. if reform does start of the supply chain, and realistically, pharmaceutical companies aren't going to get that hurt. the good news for pharmaceutical companies and investors would be clarity on what is my look for. i have seen some analysis that suggests this is just the beginning of the process of margin compression and pricing pressure for this industry. do you think that analysis is fair? ms. kunz: i think if there's a lot of consultations with industry, that will inevitably work out in the industry's favor, to some extent. at least this scenario in which if trump had come out of that said this is when what you are pricing and how to deal with it,
that would be a very different picture than we are going to start consulting and open the door, that works for both sides. not necessarily sure this is going to be an extra very story of margin compression, though it certainly could be, it is certainly possible. there are ways the government could pressure drugmakers, but the real thing the government wanted to do anything israelis have some elements of price controls and that's not what's being discussed here. -- shery: legislation to take time. there are a variety of things. there are things hhs can do with its own for review and i think there will be accommodation of things. to amanda's poinsettias will take time and i think it's out of a multi-front approach and it's not going to be anything that changes overnight rate -- overnight. amanda: when you look at the rising cost of prescriptions, they are way off of media size, 2016 was the high water mark and
they don't look so bad. what is the political impetus? ms. kunz: if you are talking about the rising cost of prescriptions in every -- in any given year, there's been a lot not to do a lot of these one-off huge price hikes that might be more reflected in some the earlier your numbers. overall, drug prices are still increasing, for all drugs that have been on the market that have -- in some cases they lost their patent protection. there is still work the measures you can do. , thank you.hia kunz to the announcement president trump will make in the next hour. ♪ make in the next hour. ♪ mr. elliot, what's your wifi password?
wifi? wifi's ordinary. basic. do i look basic? nope! which is why i have xfinity xfi. it's super fast and you can control every device in the house. hey! let's basement. [ grunting ] and thanks to these xfi pods, the signal reaches down here too. so sophie, i have an xfi password. and it's "daditude". simple. easy. awesome. xfinity. the future of awesome. >> this is bloomberg markets. moments from now, president trump will deliver a long-awaited speech on his plan to cut drug prices and boost competition. from new york, on scarlet fu
alongside lisa abramowicz. joining us is kevin cirilli who is at the white house. in studio with us is cynthia kunz, health care reporter for bloomberg news. kevin, it's been a busy day with the president. he met with ceos of automakers and now he's getting ready to make this announcement on drug pricing. talk us through what we are expecting. i just spoke with fiat chrysler ceo sergio marchionne. the meetinge left with auto ceos, saying it was positive and they talk a lot about the industry concerns, concerns over to regulatory structures given what governor brown of california is proposing versus what the administration is proposing, which is more in line with the ceos. what willut to see happen with big pharmaceutical companies. bill cassidy here at the white house. i caught up with him.
president trump has had some tough talk for bigs pharmaceutical companies, especially on the matter of benefit managers. take a listen to what senator cassidy told me when i asked him if he thinks trent -- president trump shook it with that. >> their willingness to look at that, is fresh thinking. expertise as a ceo pharmaceutical company. >> will he have conservative support on that? >> he will have this conservative report -- support. sayingsenator caskey that he anticipates the administration to call for some type of study when it comes to pharmacy benefit managers, something secretary is our ctesiphon on yesterday. see theteresting to banner across the podium, lower drug prices for america. cynthia kunz is also with us
here in new york. i would love to get your take on what we could potentially get today. the fact thaton pharmaceutical stocks are up a percentage point, people are saying, talk a lot, we don't buy it. >> the market reaction says a lot here. it does not seem like anything that we have heard in the plan targets the pharma companies themselves to crimp profits. there are a few things that may come up around the government having a stronger hand negotiating some of the most expensive drugs they paid for through medicare, medicaid. those could impact pharma, but as kevin brought up, this idea of them going after pharmaceutical benefits managers turns the dialogue to another industry and does not really do much to change the dynamic -- it would do a lot to change the dynamic but not business for pharma as it currently is. it has been a busy day.
u.s. markets are closing in less than two hours. we need to get a check on where stocks are trading. julie: stocks have been trading at a pretty tight reigns throughout the day. the s&p and nasdaq have been bouncing between gains and losses. technology names holding back the nasdaq at the moment. we see tappan volume here to end the week. let's look at some of the health care stocks. not just today but yesterday, we have seen health care as a pretty strong group going into these comments by president trump. the thinking seems to be it is not a worse case scenario for some of the ideas floated on the campaign trail or early in the administration, the government negotiating directly to get drug prices down. that doesn't seem to be on the table this time around. johnson & johnson, biogen, some examples of large cap former going higher. a pretty broad rally across health care.
pharmacy benefit managers going up. one stock not participating in the rally today is boston scientific, shares down 1%. the company will be featured in a "60 minutes" feature sunday that focuses on 100,000 women suing the company over gynecological mesh implants. the company coming out saying they are aware of the segment, but they don't think there is new information in it that is not already publicly available. appears to be putting pressure on the shares. outside health care, we are watching chipmakers. thatt earnings from nvidia largely beat estimates, including for the first time, the company coming out with the revenue it gets from cryptocurrencies. 9% of overall revenue. withon as they came up that number, they said they would be decreasing the number in the coming quarter. nvidia has been climbing and climbing going into that earnings report but it is
putting pressure on other chipmakers. also lower. speaking of cryptocurrencies, bitcoin is having its worst week in about seven, down by 11%. interestingly, it looks like bitcoin peeked around the time futures started trading on the public exchanges. a bad week for bitcoin as we see nvidia also fall today. scarlet: thank you, julie. as we await the president to begin his speech, let's go to first word news with mark crumpton. mark: health and human secretaries -- services secretary alex lazar says some of the policies president trump will announce today will be very disruptive. secretary a czar told bloomberg television we need to bring what we pay down for our drugs because we are overpaying now. the system is very broken because every incentive is it is toward higher list prices over
and over again, higher out-of-pocket for patients. we are looking at a fundamental shift in this entire system. it will not be overnight but the president is rolling out the most comprehensive approach to prescription drug price affordability of any president in history. according to recent polling, a majority of americans say passing laws to bring down prescription drug prices should be a top priority for president trump and congress. we are awaiting those remarks from the president. as soon as he becomes available, we will bring them to you. at&t says hiring president trump personal lawyer was a big mistake and its washington policy chief who hired him is retiring. at&t paid and $50,000 a month for a one-year contract. the world health organization is taking steps to curb the ebola outbreak in congo. vaccines will be shipped as
quick as possible to the region. two cases of the virus have been confirmed and there are nine other suspected cases. one ebola related death has been confirmed. the virus is fatal enough to kill 90% of cases. this is the ninth outbreak in congo since 1976. israel's defense minister is calling on syrian president bashar al-assad to get rid of iranian horses in the country. the minister said israel is not looking for friction but will not tolerate iran establishing a presence on its doorstep. earlier this week, israel attacked dozens of suspected iranian targets in minister sait looking for friction but will not tolerate syria in response to an iranian rocket barrage. iran has back tens of thousand militiamen fighting alongside president assad's forces in the civil war and said israel's attacks were fabricated and baseless. global news 24 hours a day
powered by more than 2700 journalists and analysts in more than 120 countries. i'm mark crumpton. this is bloomberg. thank you. a reminder that president trump will soon deliver a long-awaited speech on his plan to cut drug prices and boost competition, it is called the american patients first plan. with us is kevin cirilli who is at the white house. in studio is cynthia koons. aboute talking earlier how among the changes the president is expected to call for, he wants to require other countries to pay more, loose price controls on pharmaceuticals. we see the president coming out of the white house. he is getting ready to make his way to the podium. this was supposed to begin at 2:00, so relatively on time. lisa: we were expecting him to be late because he has been viewed two most of his conferences. scarlet: you wonder if he will
take questions. let's listen in. >> i want to thank secretary a azar, ambassadors, commissioner gottlieb. scott gottlieb has done a fantastic job. where is scott? stand up, scott. stand up. [applause] and right to try is happening, right? right to try, so important. administrator werner, director mulvaney for being here with us today, the beautiful rose garden at the white house. we are also honored to be joined by senator bill cassidy. senator? senator cassidy, please. [applause] friends, senator orrin hatch. [applause] thank you, orrin.
thank you. congressman michael burgess. michael, thank you. [applause] thank you. congressman buddy carter. [applause] forte.sman greg jehan hi, greg. [applause] numerous state officials from all over the country. today, my administration is launching the most sweeping action in history to lower the price of prescription drugs to the american people. we have wanted to be doing this, we have been working on it right day one. it has been a complicated process but not too complicated and today it is happening. we will have tougher negotiations, more competition, and much lower prices at the pharmacy counter, and it will start to take effect very soon.
my administration has already taken sick of you steps to get drug prices under control. we reformed the drug discount program for safety net hospitals to save senior citizens hundreds of millions of dollars on drugs this year alone. we are also increasing competition and reducing regulatory burdens so drugs can be gotten to the market quicker and cheaper. we are very much eliminating the middleman. the middlemen became very rich. [applause] right? whoever those middlemen were, a lot of people never even figured it out. they are rich. they will not be so rich anymore. last year, the fda approved more than 1000 low-cost generics, the most in history, which has
already saved the american people nearly $9 billion. thank you, scott. [applause] next we are going to take on one of the biggest obstacles to affordable medicine, the tangled web of special-interest. not too many are sitting here today but they used to be here all the time. the drug lobby is making an absolute fortune at the expense of american consumers. no industry spends more money on lobbying than the pharmaceutical help rx industry. companies spent nearly $280 million on lobbyists , that is more than tobacco, oil, and defense contractors combined. health insurance companies and other providers spent another $200 million to protect the status quo and to keep prices artificially high. and they have been very
successful doing it for many, many years. everyone involved in the broken drugmakers, insurance companies, distributors, pharmacy benefit managers, and many others contribute to the problem. government has also been part of the problem because previous leaders turned a blind eye to this incredible abuse. but under this administration, we are putting american patients first. [applause] thank you. i have instructed secretary azar to begin moving forward on reforms that will bring soaring drug prices back down to earth. our plan takes steps to derail the gravy train for special interests by ending obamacare's
twisted incentives that actually encourage higher drug prices. it also gives medicare part d plans new tools to negotiate lower prices for more drugs and makes sure that medicare part d incentives encourage drug companies to keep prices low. a big incentive to do that. we are not going to reward companies that constantly raise prices, which in the past, has frankly, companies, alex, used to run one of them. nobody knows the system better than alex. that is why we need him. and a very successful one. our plan will and the dishonest doubledealing that allows the middleman to pocket rebates and discounts that should be passed on to consumers and patients. the pharmacist gag
rule which promises pharmacist for telling patients how to save money. [applause] ripoff and wel are ending it. we are getting tough on the drugmakers that exploit our patent laws to choke up competition. our patent system will reward innovation but it will not be used as a shield to protect unfair monopolies. the fda will also speed up the approval process for over-the-counter medicines so that patients can get more medicines without prescription. finally, as we demand fairness for american patients, at home we will also demand fairness overseas. when foreign governments extort
unreasonably low prices from u.s. drugmakers, americans have to pay more to subsidize the enormous cost of research and development. in some cases, medicine that cost a few dollars in a foreign country costs hundred of dollars in america or the same pill, with the same ingredients, in the same package, made in the same plant, and that is unacceptable. you can look at some of the countries. their medicine is a tiny fraction what the medicine costs in the usa. it is unfair and it is ridiculous and it is not going to happen any longer. [applause] it is time to end the global freeloading once and for all.
i have directed u.s. trade representative bob lighthizer to make fixing this injustice a top priority with every trading partner. and we have great power over the trading partners. you are seeing that already. america will not be cheated any longer and especially will not be cheated by foreign countries. the american people deserve a health care system that takes care of them, not one that taxes of oures advantage patients and our consumers and our citizens. these reforms are just the beginning. in the coming weeks, we will work with congress to pass legislation that will save americans even more money at the pharmacy. for that we need the help of congress, and we think it will be forthcoming.
every day to ensure all americans have access to the quality of affordable medication they need and deserve, and we will not rest until this job unfair pricing is a total victory for the usa. it will happen and it will happen quickly. so thank you again, everybody in the audience, thank you, secretary azar. i would like to ask the ,ecretary, a very talented man to come up and do a little explanation because we will see those prices come down. it will be a beautiful thing to watch. thank you. mr. secretary? [applause] thank you very much, mr. president for that powerful call to action and for your leadership on this issue.
i can tell you, i interact with the president every three days by phone or in person. there has not been one discussion with the president in any circumstance where drug pricing and bringing down drug pricing has not been the first and last thing that he has mentioned to me. it clear how important it is to bring down health care costs for the american people and get better deals on drug pricing in particular. that is why you have made history today, by laying out the most copperheads of action plan for drug affordability of any president in our history. the problem of high prescription drug cost is something that has been talked about in washington or a long time, but that is all it's been, talk, talk, talk. we are privileged to have a president finally taking action by laying out a blueprint for solving these problems using private-sector competition and private sector negotiation. we are not going to propose cheap lyrical gimmicks.
the president's blueprint is a sophisticated approach to reforming and improving this unbelievably complex system. everybody at hhs is rolling up their sleeves to get to work on this. let me give a couple examples. think about all the time everyone spends much drug company as on tv and how much information companies are required to put in them. if we want to have a real market for drugs, why not have them disclose their prices in the ads, too? [applause] consumers would have much more balanced information and companies would have a very different set of incentives or setting their prices. we are in the league going to look into having the fda require this. president trump has called for tougher negotiation and better deals, so we will deliver on that, too.
i were blueprint brings the latest negotiation tools to our government programs. also asked negotiation to parts of medicare where right now hhs just gets the bill and we pay it . and these are just some of the more than 50 actions that hhs has planned or is under consideration in the blueprint for action released today. this is not a one and done deal. it is a comprehensive process and as the president said will take time to reorder an entire complex multibillion-dollar system of our economy. but we are going to drive real change in the system while continuing to lead the world in innovation and patient access to medicine. you again, mr. president, for your vision, your leadership. we are eager to get to work with real competition in with the right incentives. your blueprint will finally put a american patients first. at this point, i will be joining sarah huckabee sanders for the press briefing this afternoon
and will take questions to provide more detailed information of all the elements of the president's plan. thank you very much. [applause] scarlet: you have been listening to president trump and health and human secretary services alex lazar with the president unveiling the principles behind his american patients first plan. calltary azar called it a to action but you wonder how much the president and executive branch can do without congress. alex lazar says the fda is looking into requiring pharmaceutical companies to disclose pricing on their drugs and advertisements that you see. that seems like a game changer. scarlet: it does potentially. it is much more specific than a lot of what we had heard up until now. ,et's bring in kevin cirilli
and cynthia koons. kevin, let me go to you first. how much of what we heard was new versus what we heard in the campaign trail in the past? kevin: we didn't hear anything about pharmacy benefit managers. there was one point where i thought president trump would use that term specifically when he said they were aiming to make the middlemen -- cut out the middleman -- have them not profit from it. he stopped short of naming them. this was a populist president's speech. this was fiery rhetoric coming from president trump, reminiscent of what we heard on the campaign trail. we will have to wait until the briefing to get secretary azar's take on the specifics, but i totally agree, that notion on the disclosure toward the fda requirements is something that is definitely a standout line. very quickly, the third point in the president trump calling on
congress in the next couple of weeks to bring forward some type of legislation that they would be able to enact. right now there are couple of working proposals but it is really unclear whether or not this would get a major legislative push ahead of the midterms. it is also unclear whether or not republicans are united on the disclosures. as president trump said to frankly, alex, used to run one of them, so nobody knows the system better than alex. of course a reference to eli lilly, which secretary azar used to run. they have a heavy lobbying presence here in washington. lisa: definitely talk a lot about that, saying that industry is the most aggressive with their lobbying cost. cynthia, one thing that kevin was talking about was, they didn't talk about pharmacy benefit managers. if that is not who he was talking about when talking about the middleman, who was he talking about? cynthia: that is who he was talking about but he didn't say it. that indicates there is still
room for working out how exactly this will work, how this will be rolled out, pointing to the lobbyists is interesting. scripts,ok at express the shares are relieved that this did not sound so strong in terms of targeting them and their role in the system. it is very hard to see how exactly they would do that and what that would be that would not be extraordinarily disruptive to the way drugs are paid for and reimbursed in this country right now. maybe that is why they did not go that are. scarlet: an oblique reference to the pharmacy health care managers. kevin, the president also saying he was empowering robert lighthizer, the u.s. trade representative to bring up drug pricing in his negotiations with other countries. they will take this a step further when it comes to folding in drug prices into the trade negotiations. kevin: absolutely. they are trying to push those
other developed countries to pay more. pay attention to canada in particular. the canadians are definitely going to try to figure out what precisely ambassador lighthizer will do. i think you have to take a much broader scope here with nafta concluding. lisa: thank you, kevin cirilli, cynthia koons, for all of your reporting on this. it's been a long day, i know. coming up, more on the president's new drug policy. will beetary alex azar joining sarah huckabee sanders for that white house press briefing. this is bloomberg. ♪
finished speaking he got -- about new drug policies. he says he is getting tougher on pharmaceutical companies. earlier, executives from 10 auto companies met the president and his cabinet to reduce -- discuss the administrations plan to thece gas emissions set by obama administration. trump also reiterated his concerns about nafta. president trump: we are renegotiating and we'll see what happens. the igo and canada have -- mexico and canada -- look, they do not like to lose the golden goose, but i am representing the united states. i'm not representing mexico and i am not representing canada. the president was also asked if he has confidence in epa administrator scott pruitt, to which mr. trump replied yes i do. challenging --
the federal judge has rejected the government's bid to dismiss this lawsuit wrought by the aclu and electronic frontier foundation. the fourth amendment requires law enforcement to obtain warrants before searches, but there are exceptions for searches at airports and at u.s. ports of entry. denied thatuse has an administration official dismissed senator john mccain's opposition. -- opposition to president itmp's cia nominee, saying doesn't matter because "he was dying anyway." the 81-year-old arizona republican is battling brain cancer. german chancellor angela merkel was critical of president trump's decision to pull the u.s. out of the iran nuclear deal. she says the president has damage trust in international order. meanwhile, merkel discussed the matter with russian president vladimir putin. the kremlin says they agreed to keep complying with the iran
accord. global news, 24 hours a day, on air and on tic-toc on twitter, powered by journalists and analysts in more than 120 countries. i'm mark crumpton, this is bloomberg. you, mark. president trump has made more progress with north korea than critics thought possible. he is set to meet kim jong-un in for next month, but a former senators says this is only the start of a long and consultative process. he spoke with us today. take a listen. >> getting rid of nuclear weapons, and north korea already has nuclear weapons. that is the distinction with iran. they have a nuclear program, but not nuclear weapons. north korea has nuclear weapons, nuclear materials, chemical, and probably biological weapons, as well as a conventional arsenal. this is not just denuclearization that has to take place if we want stability on the korean peninsula. there is demilitarization, and that will take time. the big obstacle will be the
north korean demands for economic relief and the united states' demands for immediate disarmament. we need to find a way to parallel those two things. it was pointed out that this was done after the breakup with the soviet union with three companies -- countries. they had to get rid of all of their nuclear weapons and most of their materials. it can be done. it will take time and patience, and what we have to do is avoid either walking away in despair if we do not get an immediate solution to every problem, or pre-determining that we are andg to have victory stymieing the ball or high-fiving on the 50 yard line. it will take time. >> go back to the early 90's, when you were working on this. sounds like the north korea situation is more expensive and complicated. we did not have troops on the
border with context on at the time. troops like we do in south korea. we did not go in and save their economy. should we go into something that includes helping them economically as well as demilitarization, not just denuclearization? will have to be apples as well as sticks. we have had sticks with , sticksul sanctions with friends like china, south korea, japan on that. toughe to continue to be on the sanctions, but we also have to understand that the north koreans are going to want economic relief. the south koreans are playing a very skillful role here, and that is one of the great distinction between previous overtures of peace from north korea and now. in the past, north korea has tried to isolate south korea. now south korea has, in effect, led the way. this is very encouraging. howre you surprised that much progress has been made so quickly, and how hopeful are you
going forward? is this gold or fools gold? >> i think it could be either. we have to understand it, but we have to be prepared to either stick goes to our allies, south korea and japan. that is absolutely essential. would say our colleagues from china and russia have to play a role. this will be a multilateral effort and is going to take time . you do not just get rid of nuclear weapons and materials by picking them up on an airplane and dumping them in the ocean. it takes a lot of care to handle them safely and make sure they do not get in the wrong hands, particularly as we go through this, we have to make darn sure that there are not any exports of nuclear materials that could be used by terrorist groups that do not have a return address and cannot be deterred. we of those are factors, but at least are talking in a very serious way, and i think that is a big plus. >> what i find interesting is the different ways the u.s. appears to be going about north
korea and iran. i feel like it is the carrot now with north korea and the stick to iran. do you get a sense of how serious and strict the u.s. will be in in forcing sanctions that are being re-upped? >> it is hard to tell. if you are talking about iran, i am not encouraged on that front. have inadvertently and unintentionally thrown a boomerang at the iranians. it is coming back to hot us, because the nuclear agreement with iran was designed for one purpose. that is to stop their nuclear weapons program. it has done that. it has not stopped their missile development. it was not intended to. it has not stopped their bad behavior. it was not designed for that, and we could have never put together a coalition to screen -- squeeze the koreans economically if we had those goals. right now, i'm afraid we are basically taking our eye off of them, we being the group of
countries that put this together with iran. it was not a you and us bilateral agreement with iran, it was multilateral. we will be focusing more right talks with our allies about secondary sanctions and we are about stopping the other behavior of iran that is so dangerous to the region and to the world. i am concerned that we are heading in the wrong direction. i hope we can pull it back together. of dialogue a lot with our european allies and other allies to help negotiate the deal, including russia and china. nunn,t: that was sam cochair of the nuclear threat initiative, speaking earlier on bloomberg. lisa: coming up, more on the president's new drug policy. due to join sarah sanders for the white house press briefing, possibly to give more details. this is bloomberg. ♪
lisa: this is bloomberg markets. i'm lisa abramowicz. scarlet: and i'm scarlet fu. i was going to say i am the stock of the hour, but anyway. it has been a rough hour for health care. julie hyman been following all of the action. she was tracking it during the speech, and we saw some big move s in the pharmacy benefit managers. >> we have this strong rhetoric. we are going to do something about the middleman and drug prices without the followthrough . we did get some details, not in or themise -- comments secretary's comments, but in the release the white house put out.
there are some details about more negotiation between on certain drugs, but they are not yet talking about which drugs they are highlighting here. it is unclear now. through armstrong was tweeting about this, and he said what this appears to do is perhaps even give more power to some of the pharmacy benefit managers who negotiate with medicare. lisa: hold on a second. didn't he have able speech about trying to -- about a whole speech about how the middleman has gotten too rich and we need to wipe them out? that is pharmacy benefit managers? the stockging from performance, drug prices are not going down because guess what? the drugmakers are going up, the pharmacy benefit managers are it is verynd interesting. the rhetoric of the speech being translated into stock performance and the perception of what is going on. scripts take a
sharp leg lower and reverse did the same thing, and i have been watching some of the specialty pharmaceutical industry. is a company that has a number of different drugs, some of them high price, and that stock is now up by 7%. the move is the molar in large -- pharma as well, just similar in large cap pharma as well, just not as dramatic. scarlet: is this subject to competition, like pfizer, merck, or other guys? because it is looking at more niche areas. julia: in some cases no, because it is so costly to make those drugs, so generics do not take them on as frequently as some of the more common drugs. not what it is really one would expect necessarily following this kind of speech. if you look at how health care has done, it has not been doing
well. take a look at the bloomberg. we have a look at how it has done this year. this is the ratio of the s&p health care sector to the s&p 500. it has been trending lower, so the reversal higher today comes on the back of underperformance. to be fair, these stocks had been falling not yesterday, they rebounded yesterday, but in recent days they have been falling going into these comments. lisa: there was a lot of interesting stuff that he did say. one thing he highlighted was the fda approved last year 1000 generic drugs, the most on record. that is interesting in light of the fact that generic drugmakers have not been doing that well because of this increased competition. pharmaceuticals, for example. if it is all bark no bite, it seems to be what the equity market is saying right now. are there details that could come out that could change that? what are you watching to see? julie: we certainly want more details. we have a blueprint, which is what the white house has put
out. but it is not entirely fleshed out. it talks about how we will they be have some negotiation on some of these drugs with the various parts of medicare, but we do not know which drugs. that will be important. how is the negotiation going to work? that will be important. we are still watching for a lot of meat on the bones, so to speak, of how this is going to work. scarlet: we also have to watch for the trade negotiations, because robert height life -- robert lighthizer is going to bring this up, how other companies -- countries have price controls on drugs and what that will do in america. julie: so there is more uncertainty now in some areas then there was before the speech, but if the market was worried about it, that would be priced in to some degree. that is not reflected in what we are seeing today. hyman, thank you so much, keeping an eye on those health care companies. coming up, a push for hollywood diversity. the person behind the inclusion
scarlet: this is bloomberg markets. i'm scarlet fu. remember when francis mcdormand brought up the inclusion rider in her oscar speech? one of the authors behind that was stacy smith. she spoke with us this week. >> i was sitting in my office one day, and i was thinking about how do we create change? the numbers had not moved for years at the time. that particular day. i just kept thinking to myself, "there must a quicker way." it really just hit me that people in power who care about inclusion, care about diversity, they can actually embed it in their contract. this would be a way to deal with supporting the small roles on screen very quickly who we do
not see could appear for the first time. in some respects ever, we could see the entire ecosystem change in a short amount of time. what happened was we released a big report in february 2016, and the head of strategic outreach at pearl street films came to see me. they said how do you change the numbers we found in your report? i said there are a whole series of steps, but the inclusion rider is one. if ben affleck that behind this, we might be able to create change. we found a civil rights attorney with a strong employment background, and the three of us with members of my team in -- created the inclusion rider language and started rolling it out last fall. >> so did frances mcdormand
speak at the oscars, when she shouted inclusion rider, did that move the needle? started trending, the most looked up phrase of the evening. people were curious. seeing not only the press inquiries, but from talent, agents, and from our emmanuelle.- aria in six minutes, they said why would anyone not do this? i am paraphrasing. the rest is history, because that move from such an important agency in the industry, that can shift the ecosystem so quickly and ensure that there is inclusion on screen and behind the camera. hollywoodthink that is waking up to the diversity problem? >> oh yes.
it is all about challenge, -- her it is . do not see -- we see a series of stories we do not look like we have seen before. leave, big featuring marketing campaigns behind those movies. being released in 4000 theaters in the u.s. -- all of the big marketing push around these amazing stories that so happened to have leads that are not straight, white, able-bodied men. >> we have talked a lot about movies. what other areas do you think need to wake up for this diversity problem? diversity has stalled. we see a lot of diversity in tv, but that is across racial and ethnic roots. we need to see middle eastern characters, characters from the lgbtq community, the
community, veterans, diverse backgrounds economically. really pushing not only television, whether it is cable, basic cable, premium cable, streaming outlets do not rely on the status quo to tell amazing audiences arese hungry to see the world reflected on small and large screen, like they see in this country. -- and beside film, tv, and digital, we have started looking at music, and are doing issues of inclusion in music as well. lisa: gordon brown is launching a new funding plan for education with the government. >> almost 260 million children are school age are not going to school today, and they will not go to school any day. or are 400 million children who never get education beyond the age of 11, and there are 800 million -- half the world's children -- who are not fitted for the workforce of tomorrow.
the real worry is that by 2030, the year we are supposed to have every single child in school -- sustainable development goals -- that figure will still be 800 million and there will still be 200 million children not going to school. we do not do anything about it, we will not be able to solve this use problem of literacy and an uneducated half of the world. if we do something about it with this proposal today, we can actually look forward to meeting the sustainable development goal that every child is in school. is about aproposal consortium of donors and multilateral development banks. explain the mechanism of this? raise 10 million dollars, which would dramatically transform the possibilities of getting education to people who do not have it at the moment. what we are asking is that donor countries who give money and aid to give guarantees. we want to do what the world bank does, and that is create a fund based on loans, and then have a buyback facility where you can create the loans into
low interest loans of credit that are necessary to meet the conditions of individual countries that are trying to make education work. we need these countries to be committed themselves. they have to invest in other patient -- education otherwise. the combination of the two, we think, can create about 200 million school places. >> so the key would be selling this land two countries. who have you spoken to? and several other banks are supporting this proposal that came out of a very highly regarded commission, and now we are talking to donors. european donors, asian donors, america, canada now. the good thing about this is it can go ahead with the number of initial pioneer contributors. we do not need to wait for every single potential donor to say yes. we think just as we did at the facility for vaccinations and immunization, and you might know the success in -- vaccinating 500 million
children, 500 million lives saved, we asked volunteers to come forward. it started with six, went to 10, and there are more now. , donorsy contributions asked to be involved. if people choose not to be involved, that is not a veto, we just have one less contributor. how involved are young people themselves? >> this is amazing, because we have seen young people speaking out around the world about the gun tragedy, but you are also seeing it in india, where young people are coming together in a huge march to oppose child marriage and say that every girl should have the chance to go to school. today, we have an extra 1.5 million signatures, and this time they come from pakistan, people, andyoung that adds to the 10 million signatures we already have. 11.5 million young people are demanding change. for a betterentum
world that is not going to stop. i see more of young people becoming a voice for change, and they might shape the older generation by saying why, when you had the chance, did you not deliver education for every child? you made promises from 1948 onwards and there are still 260 million people not in school. they are forcing us into taking the action that is necessary. >> i can't let you go without asking you about the state of u k year. the you said you did not advocate for a second referendum back then. how about now? >> what i have always said is that the brits -- something i regretted a great deal. cooperation ise falling down between britain and europe, iran and america, china and america with the trade war's, the wto, the trade organization not being able to get its act together -- what we are talking about today is a
bright light in a pretty dark sky. corporation between these countries that i am talking about and all the international institutions is at least working in one area, where the educational community is coming together to say we need this new facility. i am not talking about other issues today, i am talking about where you can persuade people that international cooperation can work. perhaps we can make a breakthrough. if we make that breakthrough on education, millions of children will benefit. it will be a signal that global cooperation actually does work. >> are you involved with brexit right now? >> of course i am involved with brexit in britain. you would expect me to be so, just as i was involved when there was a referendum in scotland. retail.
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scarlett: we are live over the next hour. here are the top stories we're covering. the president outlined his plan to cut drug prices and boost competition. semantichave shares of plunging, the worst day in almost 17 years. after the company revealed an internal investigation that will delay its annual report. jumping before they are pushed. eisen on concerns the acts may be able -- that the x will fall. the daily briefing is underway. you're listening to health and -- health services administrator. >> it is important we have more competition, we need a final and
vibrant generic drug industry. we need to foster and nurture a letterpetitive bio-some -- bio-similar complex. we need to foster and nurture that. we also have to get after pharma companies who engage in anticompetitive practices and try to block the entry of generics or i/o-similar products to market by, for instance blocking the products of the cannot do the studies to get approval of an affordable generic or bio-similar market. we will go after these abuses. better to bring more and tools to medicare program so we get the best deals. the part d drug discount program for senior citizens is 15 years old. i was there when we created it and helped to launch it. it was -- still a great program
but it had the best tools, it was the best and negotiating great deals for senior citizens and was able to drive formularies that were efficient and that is what helped keep the cost of the drug plan down below forecast and low premiums throughout its time. as so oftens happens with government programs, it got frozen in place. the private sector kept adapting and learning especially after the economic crisis in 2007 how to control drug spend even better. stayed more static. we need to bring the same tools that are available to the private sector to those trump plans so they can negotiate better. we need to unleash them so they can drive great deals. we have another part of our program which is called part b. these are the drugs the physician administers.
now are paid basically on a list price plus a market. they send us a bill, we write a check. no negotiation involved and the president has proposed in his budget and we are reemphasizing we have to figure out ways to move those drugs, especially the high cost ones into the private part b drug plan negotiations so we can get a deal and start getting bargains on that for our seniors and taxpayers. we need to look at other mechanisms and you will see other was a helpless negotiate better deals for those plans. this is a very complex area. we have to bring incentives to drug prices. right now, every incentive in the system is to increase and have high list drug prices. everybody in the system except the patient and the taxpayer is tting their beak
along the way. math works that way. we need to flip the incentives backwards so it makes less sense to increase prices. in the roseut this garden. we're having the sba look at how we can require and direct to consumer tv ads that you have to disclose the list price of your drug. we believe it is an important part of their balance if you are discussing a drug, telling them the good things the drug can do. it is material and relevant to note of it is a $50,000 drug or a $100 drug. the patient will have to bear a lot of that cost. we have an medicaid and can't -- medicare incentives we can turn around on list prices.
as part of obamacare one of the deals with the pharma industry was capping the statutory rebates on drugs in the medicaid program at 100%. congressto work with to look at overturning that cap on rebates. that will make the math works at when you increase your list price it will cost you more are a pharma executive thinking about raising prices. we want to think about some creative ideas in our programs of reversing those incentives. right now in our drug discount program, if you have a drug that fits into one of these protective classes it is a must impossible for the drug plan to negotiate and get any kind of discount from you. that is -- anybody gets that. what if we say you only get to be in that protected class if you have not raised your list price in the past 18 months. what if we say you can be exempt from the specialty tears where
the patient has to pay a lot out of but only if you have an increased -- have not increased her list price. a lot of tools like that. the other big area is the system of rebates we have with pharmacy benefit managers. we are calling into question today the structure of using rebates as the method of negotiating discounts in the pharmacy channel because right now, every incentive is for the drug company to have a high list price and to negotiate rebates down often in a non-transparent way. , flatf we said no rebates price, fixed price in the contract, take away the gross to net spread that removes the -- and makes people in different two with the list price is in that system and takes away the incentives where even the pharmacy benefit manager makes money from higher list prices. we also have an issue we have to
look at which is the role of compensation for pharmacy benefit managers. now from bothg sides. there compensated by their customers the insurance companies but they are compensated by the drug companies they are supposed to be negotiating against. they are getting administrative fees, should we moved to a fiduciary model where the pharmacy benefit manager works for the insurance company or the individual and only is compensated by the insurance company or individual. forbid renew [indiscernible] on onell completely side, complete a alignment of interest. had we lower out-of-pocket drug costs? as the president talked about we will get rid of these gag rules. right now some pharmacy benefit managers are telling pharmacists you're not allowed to tell patient if they pay cash for
this generic drug it would be cheaper for you than if you run it through your insurance. we think that is unconscionable and in part d we will work to block that. it is a right that when you're sitting there with your doctor you ought to be able to know what your out-of-pocket is for a drug you will be prescribed under your precise drug plan. you ought to have that information and you ought to have information on what competing drugs are that your doctor is not prescribing and what you would pay out-of-pocket for that. that ought to be across the part b plan and the part d plan. let me give you an example. you are in with the dr., this doctor has an infusion clinic. they write you a drug that might be confused. you might have a $300 co-pay. the two like to know if doctor wrote you a self injectable drug you would have a $20 co-pay? you could have an informed discussion so that kind of informed consumer on out-of-pocket will help drive
real savings from the system. these are some of the measures, there are over 50 actions we have in the blueprint. this is not one and done. we are learning, we are open, we are hearing, we want this to be an active, ongoing process. it will take years of restructuring the system but these are big, they are bold steps, the most comprehensive attack on prescription drug affordability by any president and i am grateful president trump is standing behind us and encouraging us to do these kind of old measures. let me open it up to questions. >> there is a tremendous number of moving parts in this blueprint, many of which will require legislative action. how much of this works without the rest, do you have to do it all or part of it and how much can be done through executive action versus legislation. click set is a great question. most of this can be done with
executive action. so many of these solutions ought to be attracting bipartisan support. these are problems with to do with but we believe most of these actions are steps we can take using our regulatory authority especially with the power in the medicare program. few of them are independent -- interdependent. it is not is if anyone is requiring the preceding act. we can attack many of these steps. it is complex. rocket science, it is unbelievably complex. it is a sophisticated approach hitting at so many of the financial and business levers behind the system, instead of throwing political speak as it would have been easy to do, this is a very business mindset focus on how do you change the underlying levers. sought to -- to
solve the problem and lead to results. [indiscernible] >> already they are hit -- seeing lower prices. and -- on howde drugs,burse on medicare $320 million from that already. we will -- we are moving forward with any of these changes to make sure that they will be in the pocketbook right away. will take time, some of this will take regulatory action. it will have to go through the administrative process. lessons i walked out of the rose garden, the first question the president had, when is the execution framework? >> is it a matter of weeks or months? >> it will be months for the
kind of action we need to take. this is -- it took decades to erect this complex interwoven system. we're talking about entrenched market players, complex financial arrangements that would have to be redesigned. i do not want to overpromise that on monday there is a radical change. a deep commitment. this is fundamental structural change we are talking about your system. >> thank you. [indiscernible] international the day has been announced. -- -- maybe you do not have need any drugs if you have yoga. >> i will stick with the first one which is generic drugs.
competition in our system is final. that is why the deep commitment by the administration. calling intobout question the rebate structure. consumers see benefits? >> this is the restructuring, the possible restructuring of a major sector of the economy. one does not do that lightly. it is beginning a national dialogue with the public and stakeholders, with congress on if we were to do this, if we were to outlaw rebates in the part d drug discount program and require that the products be discounted at a fixed price. have a $1000 drug. go to the pharmacy benefit manager and say if you cover my drug i will give you a 30% rebate on that after the fact if
any of your patients use this. a $300 rebate. what this would say is instead of that, you would have to negotiate and the contract would say you get reimbursed $700 this year and maybe $702 next your for some inflation. to list price. what goes on now is a bit of a the drug company negotiates the 30% rebate and then the next day increases price 30%. it is this game of chase that goes on. fixed -- instead of fixed price and all the fees not be based on a percent of this artificial list price which, for so many people, is likely rack rate on the hotel room door. too many people are paying it and they are suffering from that. are is out today and we
seeking comment, we want to learn and we will move forward on that if it makes sense and we need to learn how to restructure things. even one pharmacy benefit manager talked about this precise issue of restructuring their contracts to get out of conundrume spread that the world is in. i believe it is doable and we will have tremendous systemic impact. notorious examples of drug companies buying drugs and raising the prices extraordinarily. is there anything that addresses that? couple and situation a of years ago. one of the elements on increasing the power of negotiation we are doing is if a sole-source generic drug which is what the instances that have gotten so much attention, when you have one generic drug out there and if there is any increase in price by a sole-source generic, we're going to allow the drug plan to reopen
their drug formulary immediately and take action against the drug whereas right now they have to wait for the and of the year in the new plan cycle. they can go after that drug and, with alternative drugs or create preferential treatment for other drugs over that one right away. any increase in price of a sole-source generic. >> you're talking about the while insurers are talking about double-digit health insurance premium increases. there is a maryland regulated that said [indiscernible] what are you doing to deal with [indiscernible] those costs. these price increases were
happening on -- happening under president obama. they continue because of the structural infirmities and how obamacare has been designed. this is why the president has been adamant about producing affordable options. for the 20 million forgotten men and woman in this country have been forced out of the individual market and sitting there without insurance even though there was a promise that there -- they would have insurance they could keep. 6.7 million americans pay $3.1 billion in the obamacare taxes for the privilege of not buying insurance that they could not afford and did not want. 80% of them make $50,000 or less. we are trying to bring short-term plans as an option. we are trying to bring association health plans as options for people. to president -- who want keep looking for more options to get people out of the traps the obamacare system has created with these uncompetitive cost
and high plans. >> a header question about another issue. the justice department indicated there is a role that would prevent [indiscernible] other any steps to repeal that? >> i will talk about drug price, i.e. i'm not familiar with that. i will look into that. medicare partout b negotiating better prices. thing when heme medicare -- the systems are ripping us off. >> the difference is having entities negotiate in a competitive environment. what happens with the socialist countries, they say you do not
come into this country unless you plate -- pay this low price. here's a low non-competitive price. you either pay or you do not come into this country. they do not care if the people in the country do not get access to the drug and people are not informed they do not have access in these rationed systems. that is completely different from what we're doing. power ofnessing the the private negotiating market to negotiate deals. the way part d works, the system we want to emulate and use tools from in that part b is one drug plan might say i am not going to cover this drug because it did not get a good enough deal and another plan might cover that drug because they think they got a good enough deal. the senior citizen is in the drivers seat. willneed -- get to say i buy this plan and pay the premium for that plan because they want insurance.
if you are in a socialized country it is one size fits all. you cannot exit unless you get on a plane to america can -- we can get access to that medicine. >> [indiscernible] presumably learn about yourself and say wait a minute. somebody who is a pharma executive is now going to be the one in charge of flooring drug prices. how is that going to work? your pitch to americans that they can trust you to say this what?versee this is >> there are 50 action plans that are hard-hitting, it is the to driveitting plan down drug prices and make drugs more affordable. i know this from having been on the other side running a drug and these issues. i looked and if you could lower drug prices, it did not work for
anyone company. this is how perverse the system is. you put yourself at a disadvantage in the system by having a lower list price drug than others. every player in the system makes off thaty as a percent list price. this is why i am so excited to be here with the knowledge that i have gotten and this team has about how we can change the rules of the road and change the system so we can reverse those incentives to make that work to make this choice is work, bring down drug prices and make things more affordable. >> one of the reasons you could not lower the price was because you were at a disadvantage? >> the system does not make that work. my job now with the president's commission is to make that work so the incentives work to bring prices down, charge less on the list price. that is what we are about.
no one company on their own can change that dynamic. the entire system is built for increased prices and high prices. this plan reverses those dynamics. >> the president said in the rose garden that [indiscernible] what process do you [indiscernible] see --ther we should increase enforcement. euro one or two examples of the abuses we're talking about. to bring us -- bring a generic drug to market, you have to prove that your version, your copy of it is by a-equivalent to the innovator medicine. you have to have access to that
to run the be able test and studies. what some companies are doing is locking down access to those medicines, hiding behind what s program. the rem can sure that for testing. that is one of the things we will be going after to make sure these anti-competitive behaviors that do not allow a affordable medicines to get to market, we blow those away. thank you all very much. a very complex system. it is the most comprehensive approach ever. look forward in the days and weeks ahead and keep engaged with you to help walk you through the different elements as you have a chance to digest it. thank you.
>> that was alex azor speaking. detailing the 50 point action plan in the blueprint in which he -- the goal is to reduce drug prices. let's go at -- get more insight on the president's plan. thanks for joining us. great to see you. what the secretary made clear his most of the actions can be done by executive action, using regulatory authority. does that sound right? that soundsnk right. it is important for the administration to act via administrative action. the congress has been the place where these proposals have gone
to die. if the executive ranch is able to use the authority given to hhs and its component agencies like the fda to advance these proposals, it will make some headway on this pressing conundrum. so, yes, executive action. >> will try to get him back. to mittenior advisor -- at the hoover institute in stanford university. an interesting proposal. one thing that he did write in a if the government proposes to limit rebates that would be problematic for the pharmacy benefit managers. seems like that is what they are doing even though you are saying scripts rebound of it. >> he talked about the middleman
without saying they were the pvr. >> who else is the middleman? >> the stock market took that as a sign to sell the pbrs and we saw a tumble. it shot back up. my question is how much this messes with republican orthodoxy. >> do we have you? you are saying that whatever the administration can get done without congress, they could move on this. much of what the president proposals meshes with republican orthodoxy? how much is it outside what republicans typically want? >> you see a significant amount of focus on the form of the regulatory system. the fda was a bureaucracy fundamentally designed in the
1970's, and now what we have, a very different and much more innovative health care system. one of the issues around reforming the regulatory process is to speed access to cures, to lower the price of those cures in the marketplace. that is one thing republicans have always talked about. this plan goes a little bit beyond that in the sense that there is an effort to provoke drugmakers potentially down the road to have to provide list prices and direct to consumer advertising. we have seen these ads on tv for various drugs. one of the steps the administration is considering taking is requiring this closure around list prices which affects the downstream pricing. the other issue you are talking about are the pharmacy benefit managers. they obviously stand to lose the most here. it is a big question about how hard the administration will come down on them. that is the one piece that was
not clear. are they going to be required to limit the rebates of -- if they get -- that they get access to. julie: people are breathing a sigh of relief. are they wrong? baked intothis was the cake already. the market anticipated around a certain amount of regulatory and policy activities. that may be part of the issue. we do not know how far the administration will go. one of the original ideas was to say we will limit the ability of delta. draw on the tot the pbm does is negotiate between the pharmaceutical company and the health plan. if the plan was to severely limit the amount of that rebate or do say they could not take that rebate anymore or there had
to be disclosure, one of the things a secretary talked about being aidea of the pbm fiduciary. they can no longer profit off of it. that affects their whole model. i would think traders would say that will be a problem for these guys. the reason why you're not seeing too much activity in the marketplace yet is we do not know how far the administration will go. scarlet: how much can be done within the current health care the existing obamacare structure? the administration tried to replace that and was not successful. they are working with the system where they have removed a lot of the teeth but it is still in place. guest: there are two issues here. in the medicare program didn't -- the administration can do a lot. what happened in the medicare plan, a lot of that is up inside the framework of what the affordable care act did. in obamacare the big question
becomes whether this administration is going to use its authority increasingly to prop up the system they have said they do not want to have to continue. the administration does have some tools at its disposal to impact how drugs are priced or within theseace compliant plants. as the administration want to continue to operate within the obamacare framework or will he go outside and continue with efforts to so-called repeal and replace the plan? >> what do you make of that, does that seem realistic? guest: there are a number of steps that have to happen before that would become law. if the secretary said they are trying to put