Transcript: Nightly Business Report – January 11, 2017

NBR-ThumANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue Herera.

Funded in part by HSS.

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(BEGIN VIDEO CLIP)

DONALD TRUMP (R), PRESIDENT-ELECT: They’re getting away with murder. The pharma. Pharma has a lot of lobbies — a lot of lobbyists and a lot of power.

(END VIDEO CLIP)

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: The president-elect takes a swipe it the drug industry. And immediately, shares of some of the world’s biggest pharmaceutical companies tumble. What’s next for the drugmakers?

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Conflict of interest. Donald Trump outlines plans to quarantine himself from his complex business empire. But is it enough?

HERERA: Pushing up prices. Why increased competition is not able to bring down the cost of life-saving medicines. The second part of our series and more tonight on NIGHTLY BUSINESS REPORT for Wednesday, January 11th.

MATHISEN: Good evening, everyone, and welcome.

For the first time in six months, the president-elect held a formal but by no means sedate news conference. Mr. Trump took questions on a range of issues at the event at the Trump Tower in Manhattan. It was one that captivated not only Main Street, but also Wall Street.

The incoming president by turns gracious and pugnacious, thanked Ford and Fiat for their U.S. investment plans and ratcheted up pressure on General Motors to do the same, he took another shot at the cost of Lockheed Martin’s F-35 program, the most expensive weapons system in history, and he repeated his pledge to repeal and replace Obamacare.

But it was his stance on those drugmakers that hit the stock market today. Pfizer and Johnson & Johnson shares were the worst-performing doubt stocks today, and just look at the sharp decline in the biotech ETF midday when Mr. Trump described the pharmaceutical industry as getting away with murder.

(BEGIN VIDEO CLIP)

TRUMP: The drug industry has been disastrous. They’re leaving left and right. They supply our drugs but they don’t make them here. They’re getting away with murder. The pharma. Pharma has a lot of lobbies, a lot of lobbyists and a lot of power.

And there’s very little bidding on drugs. We’re the largest buyer of drugs in the world and yet we don’t bid properly. And we’re going to start bidding and we’re going to save billions of dollars over a period of time.

(END VIDEO CLIP)

MATHISEN: John Harwood joins us from outside Trump Tower.

John, can we assume that the president-elect today put the drug industry on notice especially when he mentioned that last phrase there — bidding by federal drug buyers like Medicare, which is something the drug business has resisted for years.

JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: No question about it. He is reiterating something he said in the campaign. Now, the question, of course, is going to be does the Republican Congress go along with the president-elect on that issue. This has been a subject of contention between Democrats and Republicans for years, ever since prescription drug coverage was added under Medicare, Democrats wanted to use the bargaining power have consistently called for it since.

Republicans intended to say, no, that’s interfering with a free market using the heavy hand of government to weigh down on the private sector. So, we’re going to have to wait and see how this comes out. But the president-elect ran a campaign saying he was going to advocate for the interest of blue-collar workers across this country, this is one area where he’s making a signal that he’s going to follow through.

HERERA: He also repeated his pledge to repeal and replace Obamacare. Did he give a timeline at all?

HARWOOD: Not a precise timeline. He said, as soon as his HHS secretary designee, Tom Price, the congressman from Georgia, is confirmed, that his administration will offer a plan that will be passed he says simultaneously or virtually simultaneously with the repeal of Obamacare. Again challenge is going to be, what is a Republican Congress actually do? Because they don’t have a consensus on what they want the replacement plan (AUDIO GAP)

MATHISEN: Let’s talk a little bit about tax reform because he really didn’t, right?

HARWOOD: He really didn’t. He got a question about it, about whether or not he was going to rapidly have a plan to overhaul international taxation, so that overseas profits would come home, he kind of skipped past that. Of course, he was going through a lot of subjects and dinging the press quite a bit for its attitude and its focus, in particular some outlets would push the story about Russian influence and the potential intelligence raw intelligence that have been gathered about that.

MATHISEN: That was certainly the overhang at the event today. John Harwood, thanks very much from Trump Tower in New York.

HERERA: Donald Trump is not only the president-elect but also a businessman and today, he explained how he will handle the financial and business conflicts of interest that will accompany him to the White House.

Robert Frank has the details.

(BEGIN VIDEOTAPE)

ROBERT FRANK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Donald Trump today answering one of the central questions after this election, how can the richest man ever elected as U.S. president separate his business and financial interest from the Oval Office? Now, the president, of course, is exempt from federal ethics rules. But Trump started out the press conference saying he doesn’t have to do anything and, in fact, he’s passed up billions of dollars in deals since the election to avoid a conflict of interest appearance.

TRUMP: I have a no conflict situation because I’m president which is — I didn’t know about that until about three months ago but it’s a nice thing to have. But I don’t want to take advantage of something. I could actually run my business and run government at the same time. I don’t like the way that looks, but I would be able to do that if I wanted to.

FRANK: Now, today, he announced several steps to separate himself from the Trump organization.

First and foremost, he is stepping down as CEO of the company and will remove himself from operations and strategy. The company will now be run by Eric and Donald Jr., his two sons. The company will also have an ethics advisor to approve all major changes at the company and they’re not doing any new deals overseas, though they will continue to expand in the U.S.

Now, his ownership will be put into a trust. It’s unclear who the beneficiary of that trust will be. But Donald Trump’s attorney saying during the press conference, he shouldn’t have to destroy the business that he created just because he became president.

Now the big question here is whether all of this goes far enough to solve the critics who worry about a pay-for-play or the possibility of Trump employing and exploiting the Oval Office for financial gain?

RICHARD PAINTER, UNIVERSITY OF MINNESOTA LAW PROFESSOR: He cannot retain ownership interest in the business and say that he is free of conflicts of interest. He’s not and they’re going to continue to be serious legal problems as well as national security problems connected with this business empire.

For NIGHTLY BUSINESS REPORT, I’m Robert Frank.

(END VIDEOTAPE)

MATHISEN: So, is Mr. Trump’s newly online plan enough to separate himself from his business empire?

Mark Kende joins us to discuss. He’s director of the Drake University Constitutional Law Center and a James Madison chair professor of constitutional law.

Professor, welcome. It’s great to have you here.

MARK KENDE, DRAKE UNIVERSITY CONSTITUTIONAL LAW CTR DIR: Thank you. Good to be here.

MATHISEN: There’s a saying that you shouldn’t let the perfect be the enemy of the good. I think most people would say that what Mr. Trump outline today is not a perfect solution to the problem. Is it a good one?

KENDE: I think it’s very imperfect. I think it’s a little bit like Swiss peas. It has so many holes in it I think certainly it’s good that he’s recognized there’s an issue. There’s no question there.

But by putting his sons in charge of the business, it’s not really a fully blind trust. By not selling his assets, he’s eliminated that option. He still has contact, possible, his business does, with foreign governments, which raises a constitutional question.

And so for all these reasons — while it’s good that he has recognized there is an issue and has done so perhaps grudgingly, nonetheless, I think this is Swiss cheese. There are so many loopholes and ways in which foreign governments could still try to influence his businesses if they want to.

HERERA: So, it sounds as though you’re saying that he has not satisfied what’s called the Emoluments Clause in the Constitution. Is that — am I reading you correctly on that?

KENDE: I think that’s right. I think he has certainly maintained his rights to have foreign business deals that are in place from what I understand, remain in place to have foreign government leaders provide remuneration for services and other kinds of activities that are involved, and I think the Emoluments Clause was very much geared towards preventing that from happening. I’m glad he recognizes that he has to perhaps cut back on some new deals, but I don’t think he solved the problem.

MATHISEN: Professor, thank you very much for your point of view tonight.

Mark Kende is at Drake University’s Constitutional Law Center.

HERERA: On Wall Street, it was a pretty choppy session on the street as some sectors swoon on those comments from Donald Trump. The NASDAQ though did manage to notch another record close, despite the decline in health care stocks.

By the close, the Dow Jones Industrial average rose 98 points to 19,954. The NASDAQ added 11 points to an all-time high and the S&P 500 was up six. But if we learned anything from today’s market action, it’s that this market is hyper-sensitive.

Bob Pisani explains.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: The markets had a slight pick up around president like Donald Trump’s press conference earlier today. Drug stocks, for example, dropped as Trump said drug companies will, quote, “not get away with murder”, and defense names like Lockheed Martin dropped when he said he would bring the cost of the F-35 jet fighter, quote, “way down”, close quote.

OK, but why did the market move? There was nothing new here. We’ve heard all this from Trump before, and yet stocks dropped. It’s kind of hard to figure out.

However, the answer lies in where we are in the markets right now. We’re priced for perfection and that’s the problem. The markets a little like a coiled spring right now, ready to break out one way or the other. Stocks are near historic highs, consider that.

Consumer confidence is way high. Investing sentiment is very bullish right now, and volatility is very low. Now, all this is good news, but it’s a very volatile mix. So, stocks have moved on expectations that earnings in 2017 are going to be much higher than 2016, but it’s all been turbocharged by Trump’s promises of lower taxes and less regulation and this fiscal stimulus program.

And that’s where the risk lies in the very real possibility that there’s going to be some kind of disappointment in the next month or so. And the market is not in the mood for any disappointment right now.

So, here’s what I think needs to happen — traders need to get a grip and stay calm. They need to believe that better earnings will indeed be coming but not immediately and that expectations for much higher revenue and earnings growth are not wildly inflated overall.

Now, if that mentality takes hold, the markets can look forward to a relatively peaceful few months with lots of I think mostly sideways kind of action like we’ve seen in the last month, but if not, it’s going to be a very rocky winter.

For NIGHTLY BUSINESS REPORT, I’m Bob Pisani at the New York Stock Exchange.

(END VIDEOTAPE)

HERERA: So, did the market here what it wanted to hear from the president-elect today?

David Lefkowitz, senior equity strategist at UBS, joins us now to talk more about that.

David, good to see you as always.

DAVID LEFKOWITZ, UBS SR. EQUITY STRATEGIST: Thanks, Sue.

HERERA: You know, we heard a lot about international topics such as Russia et cetera. But did the market hear what it needed to hear on the business aspects of this new administration?

LEFKOWITZ: Yes, I think a lot of the details that the market has been searching for, the new economic policies, were somewhat lacking, that the healthcare and drug pricing comments really kind of came out of left field I think for a lot of investors and that was the initial focus of the market reaction you saw a lot of stocks or the stocks overall move down on that.

But then Trump did also focus on the fact that he wants to create a lot of jobs. He wants to focus on faster economic growth. That’s very consistent with the narrative that the market has latched onto since the election. So, that’s sort of assuage some of the fears around his drug comments and then stocks ultimately rebounded and finish basically where they were before the press conference started.

So, I think it was, you know, it’s sort of a wash when it comes to the press conference.

MATHISEN: You know, I’ve heard of all different kinds of risk over the years, David. Market risk, interest rate risk — we’ve got a new one, it’s tweet risk and Trump would risk, I suppose.

But what I really wanted to ask you about is Bob Pisani talked about the idea that the market is not conditioned to deal with surprises right now particularly well. Do you — do you empathize with that view? Does that concern you?

LEFKOWITZ: I think negative surprises are always going to be something that the market doesn’t necessarily handle well. But I think the rally since the election needs to be put in context.

If you look at some of the Trump proposals, that could increase earnings per share anywhere between 5 percent and 15 percent in our view. The markets up about 6 percent since the election. So, it looks like a reasonable response to the Trump’s proposals.

So, I don’t think the market looks naturally vulnerable but we do need to see some execution on some of those proposals over the next several months.

MATHISEN: So, that would be the risk then, correct, that that even though he’s laid it out it’s an aggressive certainly agenda, many does have a friendly Congress, but if things don’t move along as quickly as the market is factoring in and this is something Ty has brought up a number of times, is that — is that the risk for this market?

LEFKOWITZ: I think that’s one of the risks. There’s always risks out there.

But, Sue, I think you’re right. I do think that if progress is not made on this but was saved by the summertime and certainly into the third quarter, especially on corporate tax reform, I think the market is going to be a bit little bit disappointed about that.

MATHISEN: You know, the presidents historically have twisted businesses arms one way or another. President Kennedy with the steel strike years ago, and so on and so forth. Is there a danger in taking playing that card too many times?

LEFKOWITZ: Yes, I do think — I do think there is a risk here, Tyler. I mean, you’ve got — you see a president that’s — or president-elect that’s really getting kind of micromanaging some of these very important corporate decisions. And you know, at some level, you raise the question of — does this mean that companies are going to earn lower returns on capital and that’s not good for businesses down the road.

Right now, though, it’s very limited in terms of the companies he singled out and it’s kind of ad hoc. So, I don’t think it has a broad implications but it’s definitely something to keep an eye on.

MATHISEN: David, thanks very much. Great to see you.

David Lefkowitz with UBS.

Well, on Capitol Hill, the former CEO of ExxonMobil, Rex Tillerson, faced questions from the Senate panel, as part of his confirmation hearing for secretary of state. He is arguably one of Donald Trump’s most controversial picks, and he was peppered with some difficult questions on a number of issues, including his stance on Russia, climate change, relations with Cuba, the Iran nuclear deal, and his own personal fortune.

Eamon Javers is covering the hearing for us from Washington.

Eamon, let’s start with Russia. What did he say about that, and to that country, and about the current sanctions?

EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Yes, hi, Tyler. Well, what he said was he doesn’t think that the Obama administration has been aggressive enough in terms of dealing with Russia and he thinks that the way the Obama administration handled Russia’s incursion into Crimea and then later into Ukraine was weak. He thinks that the United States should have sent military hardware to the Ukrainian military to help them buttress their defenses and send a stronger signal to Vladimir Putin.

But one of the toughest questions came from Marco Rubio, the Republican senator who ran against Donald Trump back during the Republican presidential primary last year. Rubio sparring with Mr. Tillerson over the issue of Vladimir Putin, suggesting that Tillerson might be too close to Vladimir Putin and asking whether or not he thought that Mr. Putin was a war criminal for his actions in Syria.

Here’s that exchange.

(BEGIN VIDEO CLIP)

SEN. MARCO RUBIO (R), FLORIDA: Is Vladimir Putin a war criminal?

REX TILLERSON, SECRETARY OF STATE NOMINEE: I would not use that term.

RUBIO: What’s publicly in the record about what’s happening in Aleppo in the Russian military, you are still not prepared to say that Vladimir Putin, his military, have violated the rules of war and have conducted war crimes in Aleppo?

TILLERSON: Now, those are very, very serious charges to make, and I would want to have much more information before reaching a conclusion.

RUBIO: I find it discouraging your inability to cite that, which I think is globally accepted.

(END VIDEO CLIP)

JAVERS: So, that was just one of the rounds of questioning, Tyler. There were three rounds of questioning for Rubio. He went — was very aggressive with Tillerson in each one of them.

HERERA: Indeed, he was.

Climate change is also a hot topic. Where does Mr. Tillerson stand especially given his background in the oil industry?

JAVERS: Yes, interesting on this one. Tillerson said that a couple of years ago he’d come around the conclusion that climate change is a reality and that the United States and other governments ought to be doing something about it. But he said that this is a global issue no one country is going to solve it themselves.

So, that’s a little bit of daylight between where Tillerson stands and where Donald Trump stands, who has suggested that climate change is just a hoax.

MATHISEN: What if anything did he say about Cuba?

JAVERS: On Cuba, he suggested that the current policy of the Obama administration has simply benefited the Cuban elite, hasn’t really benefited the people in the streets there, and he suggested that the Trump administration will be reviewing that policy, possibly with an eye toward removing some of President Obama’s executive orders on Cuba. So, unclear exactly where they’re going to land on that, but clearly, a much more skeptical eye toward Cuba in this new Trump White House is coming in next week.

MATHISEN: Eamon, thanks very much. Eamon Javers reporting from Washington.

JAVERS: You bet.

HERERA: And still to come, why prices of life-saving drugs are increasing at a time when they are needed most? The second part of our series later in our program.

(MUSIC)

MATHISEN: The president-elect made his pick to lead the Department of Veterans Affairs. He has nominated David Shulkin, who is currently the undersecretary for health at the V.A. Shulkin is a physician and was the chief medical officer of several hospitals.

HERERA: Volkswagen has made it official. As we reported yesterday, the automaker agreed to pay more than $4 billion to settle its diesel emissions scandal. Six VW executives were also charged for their alleged role in the scheme.

MATHISEN: Workday lands its biggest customer so far and it’s a huge one, Walmart, and that is where we begin tonight’s “Market Focus”.

In a regulatory filing, the enterprise software maker said Walmart bought a subscription to some of Workdays human resources applications, work they noted the transaction would not cause it to upgrade or update its earnings guidance. Workday shares surged almost ten percent to $81.70. Walmart little changed at $68.53.

SuperValu posted an unexpected loss and lower sales in its latest quarter. The grocery store operator said results were hurt by persistent deflation and competition. SuperValu shares were off more than seven percent on the day to $4.43.

HERERA: Signet Jewelers reported a decline in same-store sales during the holiday period, citing weak performance in one of the company’s ecommerce businesses. The owner of Zales and Jared also lowered its high end of its guidance for the quarter and the full-year. Shares finish down three percent to $84.70.

Shares of United Continental rose after that airline said after the bell yesterday that it expects unit revenue for the latest quarter to fall less than originally thought. The company cited stronger demand around the holidays. United Continental shares rose almost two percent to $75.04.

MATHISEN: Coming up, what happens when competition does not result in lower prices for a life-saving drug? The second part of our series “Drug Price Crisis” is next.

(MUSIC)

MATHISEN: Last night, we told you about a key part of the battle against opioid overdose. A drug called Naloxone on the market for decades, its price has escalated, along with this country’s epidemic of addiction to heroin and prescription painkillers. The soaring price is squeezing budgets for first responders.

Tonight, Meg Tirrell has a deeper look at what is pushing up prices, in the second part of our three-part series.

(BEGIN VIDEOTAPE)

MEG TIRRELL, NIGHTLY BUSINESS REPORT CORRESPONDENT: Stephan Kamenicky says he started using heroin when he was 12 or 13 years old.

STEPHAN KAMENICKY, CHICAGO RECOVERY ALLIANCE: They probably did every drug imaginable to man. That’s really stayed behind with heroin.

TIRRELL: He’s lost many friends to overdose but he’s also help save lives with a drug called Naloxone, a drug which as this video shows saved his own life in 2008.

KAMENICKY: There a lot of lot of people come back and say, you know, if it wasn’t for you, I wouldn’t be really late.

TIRRELL: Naloxone can rapidly reverse an overdose to opioids like heroin or prescription painkillers, but its soaring cost is posing problems, especially to people on the front lines of the opioid crisis, like Baltimore health commissioner, Dr. Leana Wen.

DR. LEANA WEN, BALTIMORE HEALTH COMMISSIONER: The price of generic Naloxone in our city has more than doubled in the last several years.

TIRRELL: Several companies make generic Naloxone, a product from Hospira now owned by Pfizer, rose in price from less than a dollar per milliliter in 2005 to almost $16 in 2014. Another from Amphastar doubled in price just after Hospira’s.

WEN: That really limits our ability to save lives.

TIRRELL: Other generic versions are priced similarly. It’s a situation where competition hasn’t succeeded in bringing prices down.

RONNY GAL, SANFORD C. BERNSTEIN, SR. RESEARCH ANALYST: The drug companies look at this large, large increase in demand, looked at each other and says to anybody else coming in, no, well, we’re going to raise prices. Are we going to raise price?

They raised prices. Demand kept on going up, there is more. But overall, those price increases have accumulated.

TIRRELL: Pfizer says its Naloxone is priced responsibly, and has an access program to make donations. Amphastar notes increased manufacturing costs in its home state of California and investment in research and infrastructure. It also has rebate agreements with 11 states.

And some say, despite the increases, the generic prices still aren’t that high, especially when compared to new products on the market.

DAN BIGG, CHICAGO RECOVERY ALLIANCE EXECUTIVE DIRECTOR: The auto-injector which we call the Courvoisier of the overdose intervention movement, because it’s everyone loves this auto-injector. It talks to you. It guides you through the process.

But it’s very, very expensive.

TIRRELL: The EVZIO from drugmaker Kaleo costs $3,750 for two single-dose injectors, up more than five hundred percent from two years ago. Kaleo CEO says the company increased the list price expected to be paid for by insurers to boost financial assistance for patients’ co-pays. Experts saying that still weighs on the system.

MICHAEL REA, RX SAVINGS SOLUTIONS, CEO: The end of the day somebody’s always paying for it. So, who is that somebody? And the chances are good, it’s you and me, either via tax money, be our health insurance premium.

TIRRELL: Kaleo, like other manufacturers, makes charitable donations of its drugs. But rising prices are still a problem.

WEN: But we should not be dependent on the goodwill of these companies in order to deliver a life-saving medication.

TIRRELL: As the opioid crisis grows, the problem becomes ever more urgent.

For NIGHTLY BUSINESS REPORT, I’m Meg Tirrell.

(END VIDEOTAPE)

MATHISEN: And tomorrow, the final part of our series looks at what is being done about the escalating prices and what could slow the epidemic of drug overdose. You can read more about the issue on our website, NBR.com. It is a problem, a public health crisis.

HERERA: Oh, it absolutely is.

MATHISEN: In many, many places.

HERERA: And Meg has done such a great job. I can’t wait to see number three tomorrow.

That’ll do it for us tonight. I’m Sue Herera. Thanks for joining us.

MATHISEN: I’m Tyler Mathisen. Thanks for me as well. Have a great evening everybody. We’ll see back here tomorrow.

END

Nightly Business Report transcripts and video are available on-line post broadcast at http://nbr.com. The program is transcribed by CQRC Transcriptions, LLC. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Nightly Business Report, or CNBC, Inc. Information presented on Nightly Business Report is not and should not be considered as investment advice. (c) 2017 CNBC, Inc.

 

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