• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Transportation

Cramer: With Trump, Everything's a Negotiation

Just ask the drug companies or Boeing.
By JIM CRAMER Dec 07, 2016 | 01:01 PM EST
Stocks quotes in this article: UTX, BA, AGN, REGN, AMZN

Donald Trump, so far at least, has done a pretty darned good job of keeping his campaign promises as the drug industry found out today in Time magazine. That's right, in the Man of the Year interview with President-elect Trump, Time said he told them "his goal has never wavered." What's he going to do? "I'm going to bring down drug prices. I don't like what has happened with drug prices."

I think in the post-election euphoria, many stocks went up that shouldn't have, and the pharmaceutical stocks took off because Hillary Clinton, an avowed critic of drug price gouging, didn't get elected and the Senate didn't go Democratic, where we know Bernie Sanders would have been a powerful opponent of the industry. As Time reported, Trump suggested "some stock analysts may have misread his intentions. The biotechnology stocks, for example, which enjoy large profit margins under current law, rose 9% in the day after Trump's election, a rally of relief that the price controls Clinton had proposed would not happen."

In fact, we even read articles in the mainstream press about how Trump had seemingly decided to downplay the drug pricing issue. As the Los Angeles Times reported in mid-November: "The president-elect seems to have downgraded plans to act aggressively to control rising drug prices, handing the pharmaceutical industry an early victory and providing another illustration of the influence of lobbyists on the new Trump administration despite Trump's promise to 'drain the swamp' of special interests in Washington."

Oops, I guess not.

So if we dust off those campaign promises, what did Trump really call for? His main tenet: Negotiate the prices down, which basically means using Medicare's immense buying power. Back in February while stumping in New Hampshire, Trump said: "We're the largest drug buyer in the world. We don't negotiate. You pay practically the same for the country as if you go into a drug store and buy the drugs." He went on to say, "If we negotiated the price of drugs, Joe, we'd save $300 billion a year."

As the Washington Post quickly reported in a piece titled, "Trump's truly absurd claim that he would save $300 billion a year on prescription drugs," the actual Medicare drug buying program that he could alter spent $78 billion in 2014. So, the Post went on to say, "Trump in effect is claiming to save $300 billion a year on a $78 billion program. That's like turning water into wine."

The Post claims there's even more hyperbole to the claim than most realize: "In fact, depending on the source you consult, total annual spending on prescription drugs in the U.S. is between $298 billion a year and $423 billion a year. So that would mean that Trump," the Post goes on to write, "is claiming that he can eliminate virtually any cost to prescription drugs. It would suddenly be for free."

Which brings me to the real point of how we are seeing Trump work. Everything is a negotiation. Just like Trump negotiated with United Technologies (UTX) CEO Greg Hayes to keep Carrier jobs in Indiana -- he saved half of them, just like he said he'd cancel the order for Air Force One because Boeing's (BA) charging an outrageous $4 billion. Boeing CEO Dennis Muilenburg quickly pledged to the president-elect he would keep costs down. It's all about negotiation.

It was all the Art of the Deal, so to speak, to mention Trump's classic from 1987, and while he didn't save every job, he kept about 1,000 in this country and Air Force One will most likely cost less to the taxpayers because Trump tweeted out and spoke up. 

Now, drug companies are powerful in Washington. But even people in the industry, notably Brent Saunders, CEO of Allergan (AGN) , and Regeneron (REGN) CEO Len Schleifer, have admitted that some price increases are out of line. Suffice it to say the Trump riposte could be the beginning of the bargaining or, alternatively, most likely warning that the drug companies get back into line or face the wrath of the president-elect. (Allergan is part of TheStreet's Action Alerts PLUS portfolio.) 

Remember, it's the Art of the Deal, again. My suggestion: Any exec who relies on the government for business, including pharma honchos, should go to Amazon (AMZN) and get that -- soon, again, to be a bestseller. It could make them think twice before the next big increase. And remember, Trump seems to have a longer memory for his promises than the press or the industry or the Wall Street analysts seem to believe. (Amazon is part of TheStreet's Growth Seeker portfolio.)

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long AGN.

TAGS: Investing | U.S. Equity | Transportation | Healthcare | Politics | Jim Cramer

More from Transportation

Old Dominion Freight Line Is Ready to Roll Again

Bruce Kamich
Jun 28, 2022 11:15 AM EDT

Here's what traders could do now.

Southwest Airlines Upgraded But the Charts Didn't Get the Memo

Bruce Kamich
Jun 23, 2022 1:35 PM EDT

Let's take a look.

Will FedEx Deliver? Checking the Charts Ahead of Earnings

Bruce Kamich
Jun 23, 2022 12:17 PM EDT

Here's our plan.

Winnebago's Numbers Were Awesome: Here's How to Go Along for the Ride

Stephen Guilfoyle
Jun 22, 2022 11:00 AM EDT

Here's my trading strategy for investors right now.

Why It Costs $1B Per Year to Go Up Against Indonesia's GoTo Group

Alex Frew McMillan
Jun 22, 2022 6:30 AM EDT

It's not often you find a tech stock with defensive characteristics and a strong upside, but GoTo offers both.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 07:59 PM EDT PAUL PRICE

    Very good quarterly numbers from Bassett Furniture (BSET)

    Bassett Furniture (BSET) blew right through analys...
  • 04:41 PM EDT PAUL PRICE

    First Half Results - Putrid Second Half Results - Likely to Be Much Better

    It's great that we're done with June. 2022 marked...
  • 04:51 PM EDT PAUL PRICE

    We Should Be in for Better Starting Soon

    Window dressing Thursday, the last day of the...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login