Trump says pharma industry 'getting away with murder,' stocks slide

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NEW YORK, Jan 11 (Reuters) - U.S. President-elect Donald Trump on Wednesday said pharmaceutical companies are "getting away with murder" in what they charge the government for medicines, and promised that would change, sending drugs stocks sharply lower.

The benchmark S&P 500 index slipped into negative territory after his remarks at a news conference spooked investors. The iShares Nasdaq Biotech ETF dropped 4 percent at its session low and ended down 3 percent, its largest daily percentage drop in three months.

"When the president-elect says we're going to negotiate drug pricing, you have to take that seriously, but at the same this is a complicated issue because there's not going to be clarity on drug pricing reform anytime soon," said Brad Loncar, manager of the Loncar Cancer Immunotherapy ETF. "When somebody that high profile says something that negative, people do not want to invest in it."

Trump has blasted other industries for charging the government too much, particularly defense companies, but has made only a few public statements about drug pricing since being elected. He briefly mentioned Lockheed Martin Corp, Ford Motor Co, and United Technologies Corp during the news conference and promised a border tax for companies producing products for U.S. consumers outside the United States.

Back in May, then-candidate Trump said Amazon was also "getting away with murder," referring to taxes in that case. The stock fell as much as 4 percent in the next few days but is up almost 12 percent since Trump's remark.

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President-elect Trump's first press conference since election win
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President-elect Trump's first press conference since election win
U.S. President-elect Donald Trump speaks during a press conference in Trump Tower, Manhattan, New York, U.S., January 11, 2017. REUTERS/Shannon Stapleton
A member of the media waits for U.S. President-elect Donald Trump speaks during a news conference in the lobby of Trump Tower in Manhattan, New York City, U.S., January 11, 2017. REUTERS/Lucas Jackson
US Vice President-elect Mike Pence speaks during a press conference January 11, 2017 in New York. Donald Trump is holding his first news conference in nearly six months Wednesday, amid explosive allegations over his ties to Russia, a little more than a week before his inauguration. / AFP / DON EMMERT (Photo credit should read DON EMMERT/AFP/Getty Images)
U.S. President-elect Donald Trump takes questions from members of the media during a press conference at Trump Tower in New York, U.S., on Wednesday, Jan. 11, 2017. Trump vigorously denounced unsubstantiated reports that the Russian government has gathered potentially damaging information about his finances and conduct. Photographer: John Taggart/Bloomberg via Getty Images
NEW YORK, NY - JANUARY 11: President-elect Donald Trump arrives at a news cenference at Trump Tower on January 11, 2017 in New York City. This is Trump's first official news conference since the November elections. (Photo by Spencer Platt/Getty Images)
US President-elect Donald Trump arrives to give a press conference January 11, 2017 in New York. Donald Trump is holding his first news conference in nearly six months Wednesday, amid explosive allegations over his ties to Russia, a little more than a week before his inauguration. / AFP / DON EMMERT (Photo credit should read DON EMMERT/AFP/Getty Images)
U.S. President-elect Donald Trump, second right, stands with son Donald Trump Jr. right, and daughter Ivanka Trump prior to a press conference at Trump Tower in New York, U.S., on Wednesday, Jan. 11, 2017. Trump vigorously denounced unsubstantiated reports that the Russian government has gathered potentially damaging information about his finances and conduct. Photographer: John Taggart/Bloomberg via Getty Images
Numerous files are displayed (L) as US President-elect Donald Trump gives a press conference January 11, 2017 in New York. Donald Trump is holding his first news conference in nearly six months Wednesday, amid explosive allegations over his ties to Russia, a little more than a week before his inauguration. / AFP / DON EMMERT (Photo credit should read DON EMMERT/AFP/Getty Images)
US President-elect Donald Trump gives a press conference January 11, 2017 in New York. Donald Trump is holding his first news conference in nearly six months Wednesday, amid explosive allegations over his ties to Russia, a little more than a week before his inauguration. / AFP / DON EMMERT (Photo credit should read DON EMMERT/AFP/Getty Images)
US President-elect Donald Trump gives a press conference January 11, 2017 in New York. Donald Trump is holding his first news conference in nearly six months Wednesday, amid explosive allegations over his ties to Russia, a little more than a week before his inauguration. / AFP / Don EMMERT (Photo credit should read DON EMMERT/AFP/Getty Images)
People watch from a balcony as US President-elect Donald Trump gives a press conference January 11, 2017 in New York. Donald Trump is holding his first news conference in nearly six months Wednesday, amid explosive allegations over his ties to Russia, a little more than a week before his inauguration. / AFP / Don EMMERT (Photo credit should read DON EMMERT/AFP/Getty Images)
U.S. President-elect Donald Trump speaks during a news conference in the lobby of Trump Tower in Manhattan, New York City, U.S., January 11, 2017. REUTERS/Lucas Jackson
US President-elect Donald Trump Chief Strategist Steve Bannon is seen during a press conference January 11, 2017 in New York. Donald Trump is holding his first news conference in nearly six months Wednesday, amid explosive allegations over his ties to Russia, a little more than a week before his inauguration. / AFP / DON EMMERT (Photo credit should read DON EMMERT/AFP/Getty Images)
US President-elect Donald Trump along with his children Eric(L) Ivanka and Donald Jr. arrive for a press conference January 11, 2017 at Trump Tower in New York. Trump held his first news conference in nearly six months Wednesday, amid explosive allegations over his ties to Russia, a little more than a week before his inauguration. / AFP / Timothy A. CLARY (Photo credit should read TIMOTHY A. CLARY/AFP/Getty Images)
US President-elect Donald Trump speaks during a press conference January 11, 2017 at Trump Tower in New York. Trump held his first news conference in nearly six months Wednesday, amid explosive allegations over his ties to Russia, a little more than a week before his inauguration. / AFP / Timothy A. CLARY (Photo credit should read TIMOTHY A. CLARY/AFP/Getty Images)
NEW YORK, NY - JANUARY 11: President-elect Donald Trump speaks at a news cenference at Trump Tower on January 11, 2017 in New York City. This is Trump's first official news conference since the November elections. (Photo by Spencer Platt/Getty Images)
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PHARMA ON EDGE

After his promise to bring down drug spending, the ARCA pharmaceutical index gave up as much as 2.6 percent and ended the day down 1.7 percent.

The drug industry has been on edge for two years about the potential for more government pressure on pricing after sharp increases in the costs of some life-saving drugs drew scrutiny in the press and among lawmakers. The government is investigating Medicaid and Medicare overspending on Mylan NV's allergy treatment EpiPen, for instance.

David Katz, chief investment officer at Matrix Asset Advisors in New York, said negative comments on drug pricing trigger selling both from algorithms and investors who suffered from share drops when Democrat Hillary Clinton campaigned against healthcare cost increases.

Trump's campaign platform included allowing the Medicare healthcare program to negotiate with pharmaceutical companies, which the law currently prohibits. He has also discussed making it easier to import drugs at cheaper prices.

"We are going to start bidding. We are going to save billions of dollars over time," Trump said.

Medicare, which covers more than 55 million elderly or disabled Americans, spent $325 billion on medicines in 2015.

Industry trade group Pharmaceutical Research and Manufacturers of America, or PhRMA President Stephen Ubl said "Medicines are purchased in a competitive marketplace where large, sophisticated purchasers aggressively negotiate lower prices."

He said the industry is "committed to working with President-elect Trump and Congress to improve American competitiveness and protect American jobs."

Roche Pharmaceuticals CEO Daniel O'Day said in an interview at a JPMorgan conference in San Francisco that Roche Holding AG focuses on innovation and investing in research.

Price increases over the past several years have been "responsible" and in the range of low to mid single digits, he said.

At the same conference, Mylan CEO Heather Bresch said it was premature to respond to Trump's comments, when she was asked during an investor presentation. She said the industry should look again at how healthcare is set up as the government repeals the Affordable Care Act.

Trump said he plans to repeal the Affordable Care Act, or Obamacare, and replace it at about the same time. The news helped shares of hospitals, which are nervous about losing government payments for medical services. It hurt some health insurers, like Anthem Inc, which sell plans on the government-run health insurance exchanges.

Healthcare ETFs including the Health Care Select Sector SPDR Fund (XLV) and the IBB drew their highest trading volume since Nov. 10, in the wake of Trump's election.

Trading volume in XLV options jumped to 58,248 contracts, more than twice the average daily volume according to Reuters data.

Healthcare sector stocks were the largest drag on the S&P 500 and the Nasdaq 100.

(Reporting by Caroline Humer, Rodrigo Campos and Lewis Krauskopf in New York, Deena Beasley in San Francisco and Ankur Banerjee and Natalie Grover in Bengaluru; Editing by Chizu Nomiyama and David Gregorio)

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