Trump proposes rule on importing medicines which industry says won’t cut costs

By Michael Erman and Carl O’Donnell

NEW YORK (Reuters) – The Trump administration on Wednesday said it is proposing a rule to allow states to import prescription drugs from Canada, moving forward a plan announced this summer that the president has said will bring cheaper prescription drugs to Americans.

Importation of drugs from Canada as a way to lower costs for U.S. consumers has been considered for years. Alex Azar, secretary of the Department of Health and Human Services (HHS), called the move “a historic step forward in efforts to bring down drug prices and out-of-pocket costs.”

He said HHS would also offer guidance to drugmakers that wish to voluntarily bring drugs that they sell more cheaply in foreign countries into the United States for sale here.

Both pathways for importation were announced in July when Azar unveiled a “Safe Import Action Plan.”

Azar could not provide an estimate as to how soon Americans could start receiving drugs from Canada. He said the proposed rule would need to pass through a 75-day comment period before being finalized.

“We’re moving as quickly as we possibly can,” he said.

Governors of states including Florida, Maine, Colorado, Vermont and New Hampshire have already expressed an interest in importing drugs from Canada once the pathway to do so is fully in place, he said. States would be required to explain how any proposed drug imports would reduce drug prices for consumers.

The proposal faces opposition from large U.S. pharmaceutical and biotech companies.

Jim Greenwood, current head of biotech industry group BIO and a former Republican congressman, said that importation would not result in lower prices for consumers, citing nonpartisan budget experts and past FDA commissioners.

“Today’s announcement is the latest empty gesture from our elected lawmakers who want us to believe they’re serious about lowering patients’ prescription drug costs,” Greenwood said.

The Canadian government has also criticized the plan. The country’s ambassador said last month that importing medicines from Canada would not significantly lower U.S. prices. Reuters previously reported that Canada had warned U.S. officials it would oppose any import plan that might threaten the Canadian drug supply or raise costs for Canadians.

Drugs approved to be imported from Canada would exclude many prescribed drugs, such as biologic drugs, including insulin, controlled substances and intravenous drugs.

Trump, a Republican, has struggled to deliver on a pledge to lower drug prices before the November 2020 election. Healthcare costs are expected to be a major focus of the campaign by Trump and Democratic rivals vying to run against him.

The Trump administration in July scrapped an ambitious policy that would have required health insurers to pass billions of dollars in rebates they receive from drugmakers to Medicare patients.

Also in July, a federal judge struck down a Trump administration rule that would have forced pharmaceutical companies to include the wholesale prices of their drugs in television advertising.

Both the House of Representatives and the Senate are putting forth drug pricing bills that contain some of the proposals Trump has advocated, such as indexing public drug reimbursements to foreign drug costs.

But Trump has said he will veto the Democrat-led House bill if it comes to his desk on the grounds that it would slow down innovation.

(Reporting by Michael Erman and Carl O’Donnell; Editing by Leslie Adler and Nick Macfie)

The Fed will soon cut U.S. interest rates. What will it mean for your wallet?

FILE PHOTO: Federal Reserve Board building on Constitution Avenue is pictured in Washington, U.S., March 19, 2019. REUTERS/Leah Millis/File Photo

By Trevor Hunnicutt and Jason Lange

NEW YORK/WASHINGTON (Reuters) – A decision by the Federal Reserve to cut interest rates may do little at this point to cut some of the costs that matter to many U.S. consumers.

From mortgages to credit cards, banks and other lenders may resist offering substantially lower rates to consumers, analysts said, even if the central bank makes a widely expected cut to its policy rate, currently targeted between 2.25% and 2.50%.

For one thing, some borrowing costs are already low and markets have already priced in expectations the Fed would support the economy. Mortgage rates have also dropped, with rates on the average 30-year U.S. home loan falling under 4.1%, near a 22-month low, more than half a point below the average since the global financial crisis more than a decade ago, according to the Mortgage Bankers Association.

“If we drive down into the mid-3.7%, mid-3.8% range, you’re talking about historic affordability from a purchasing power standpoint,” said Mark Fleming, chief economist for First American Financial Corp, which provides insurance related to real estate transactions. “There’s not a lot of wiggle room here in the first place. I think we established five or six years ago that a mortgage rate around 3.5% or 3.6% is a floor. That’s about as low as you can go.”

That low mortgage level was when the Fed’s rates were near zero and the central bank was buying mortgage bonds in the aftermath of the financial crisis to drive longer-term rates even lower – a far cry from where policy is now.

At the same time, one of the Fed’s main goals in cutting rates is to bring inflation up to the 2% level policymakers consider healthy, and maybe even higher to make up for long periods of missing that target. If the Fed succeeds, longer-term bonds most sensitive to inflation could fall in price, causing their yields to rise. Because U.S. mortgages are benchmarked to those longer-term bonds, rates could rise again.

For many consumers, the obstacle to buying a house has not been mortgage rates, but stricter lending standards that reduced access to mortgages in the first place. Big price increases and limited supply have also made housing less affordable. Lower rates could make housing even more out of reach by spurring demand, driving prices even higher.

Financing for new cars might be a different story, though, especially given the large role of automakers themselves in the car loan business. Those businesses have an incentive to increase lending to support the auto market.

Savers, meanwhile, have been rewarded in recent months for shopping around for higher-yielding savings accounts and certificates of deposit. Thanks to increased competition, some online banks have been pushing yields up for those products even with the expected rate cut.

That could change if the Fed is embarking on a prolonged series of rate cuts, as some investors are betting. But the biggest factor could still be overall competition between financial institutions for savers’ money, said Morningstar Inc analyst Eric Compton.

Consumers, however, are in a much better place than they have been in years, by some measures. They have higher take-home pay, lower debt and better credit scores than during the financial crisis. “You’ve got consumers that are pretty healthy, savings rates are pretty good,” said Neal Van Zutphen, president of Intrinsic Wealth Counsel Inc, a financial planner. “They’re taking advantage of this anticipatory drop in rates.”

(Reporting by Trevor Hunnicutt in New York and Jason Lange in Washington; Editing by Leslie Adler)

U.S. consumer confidence at 18-year high; house price gains slow

FILE PHOTO - A home for sale is seen in Santa Monica, California, U.S., March 21, 2017. REUTERS/Lucy Nicholson

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. consumer confidence rose to an 18-year high in October, driven largely by a robust labor market, bolstering expectations that strong economic growth would continue through early 2019.

But a weakening housing market and tightening financial market conditions are casting a shadow on the economic expansion that is in its ninth year, the second longest on record. Home price gains slowed further in August, other data showed, another sign that higher mortgage rates were weighing on housing demand.

“We don’t know how long this is going to hold up, but the consumer is bullish on the outlook and this means the economy is going to continue to advance in this long economic expansion from the last recession,” said Chris Rupkey, chief economist at MUFG in New York.

The Conference Board said its consumer confidence index reading rose to 137.9 this month, the highest since September 2000, from a downwardly revised 135.3 in September. Economists polled by Reuters had forecast the consumer index slipping to 136.0 from the previously reported 138.4 in September.

Consumers’ assessment of current business and labor market conditions improved despite a sharp stock market sell-off and jump in U.S. Treasury yields, which have tightened financial market conditions. The stock market’s S&P 500 index has dropped more than 8 percent this month.

The Conference Board survey puts more emphasis on the labor market. The survey’s so-called labor market differential, derived from data about respondents saying jobs are scarce or plentiful, was the most favorable since January 2001.

This measure closely correlates to the unemployment rate in the Labor Department’s employment report. Economists said it raised the possibility that the unemployment rate could drop further from a near 49-year low of 3.7 percent. The government will publish its October employment report on Friday.

“At the end of the day, it is the job market, or the security of having a job with a regular paycheck, that supports confidence and spending,” said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto. “So far, so good.”

Consumer confidence at multi-year highs bodes well for spending in the upcoming holiday season. More consumers planned to buy automobiles and houses over the next six months, but the share of those intending to purchase major appliances slipped.

The dollar was near a 2 1/2-month high against a basket of currencies, while stocks on Wall Street were higher. U.S. Treasury yields rose.

HOUSING DEMAND SOFTENING

The economy grew at a 3.5 percent annualized rate in the third quarter and is considered on course to achieve the Trump administration’s target of 3.0 percent annual growth this year.

Growth has been spurred by a $1.5 trillion tax cut. Economists estimate the tax cut stimulus peaked in the third quarter and expect growth to gradually slow from the second half of 2019, restrained in part by higher interest rates.

The Federal Reserve has increased borrowing costs three times this year and in September removed a reference to monetary policy remaining “accommodative” from its policy statement. The U.S. central bank is expected raise rates gain in December.

Higher borrowing costs have cooled housing demand; sales and homebuilding declined in September.

A separate report on Tuesday showed the S&P CoreLogic Case-Shiller composite home price index of 20 U.S. metropolitan areas rose 5.5 percent in August from a year ago after increasing 5.9 percent in July. Growth in house prices has slowed from as high as 6.8 percent in March. Prices had been boosted by a shortage of properties on the market, but now mortgage rates have risen to seven-year highs.

“The sharp gain in mortgage rates thus far in 2018 continues to weigh on home sales as well as home prices,” said Brent Campbell, an economist at Moody’s Analytics in West Chester, Pennsylvania.

“With the Fed continuing to tighten monetary policy through the rest of 2018 and into 2019, mortgage rates are likely to rise, even more, resulting in less housing demand and modest house price growth in 2019.”

(Reporting By Lucia Mutikani; Editing by David Gregorio)