Should pharma be worried that Barack Obama will move into the White House in a couple of months? The reaction among investors in Europe would suggest a bit of anxiety, as shares in drugmakers - Glaxo, Sanofi-Aventis and Novartis - dropped today.
The US, after all, accounts for more than 40 percent of the global prescription market - and a still larger share of profits. A prominent concern, therefore, is the threat to any changes in Medicare. "The victory of Barack Obama opens the door for accelerating pricing pressure," WestLB analyst Simon Mather, tells Reuters. He estimates a change in 2010 could cause a 5 percent hit to the US market, which works out to a 2 percent impact on the global industry.
Obama promised to "take on the drug and insurance companies and hold them accountable for the prices they charge and the harm they cause," PharmaTimes reminds us, and notes that the Boston Consulting Group figures Obama’s healthcare plan could slash $30 billion from industry revenues if Medicare prices are renegotiated. And private insurers would also demand price cuts.
Yet, some say the fallout may be less dramatic than in past US elections, since health is likely to take a backseat to US economic woes, at least in the short run, and changing Medicare may be easier said than done. Says Jason Zhang, an analyst at BMO Capital Markets: "Overall, drug price control through Medicare under Obama could be perceived negatively, but practically it will be hard to implement."
Let's see what drug stocks do today...
7 Comments
http://www.pharmalot.com/2008/04/pharma-still-betting-on-barack-obama/
Health care's microeconomy is part of the larger US health macroeconomy. If someone like Peter Orszag, from the current Congressional Budget Office, is brought into head up, say, CMS, then health policy will play an integral role in the nation's macro-economic planning. He's been talking a lot about cost-drivers in the health economy over the past 2 years, and is named as a possible Obama appointee for CMS director.
Agree with Zhang--doubtful that the Medicare Part D law would be reopened just to deal with the pricing issue. If the benefit were to be reformed strucutally then the effort would be justified.
It would be much easier for CMS to write regs lowering reimbursment to PDPs and Medicare Advantage plans than it would be to reopen the entire law.
Bob,
I disagree with Zhang regarding Part D. There are a number of proposed measures that could be easily (relatively speaking) implemented without destroying the current structure of this popular program. Waxman and Baucus have two very different approaches, both of which can be implemented without significant changes. And, since Congress is going to have a great desire to eliminate the "overpayment" to MA plans, it would be easy to use that legislation to make changes to Part D.
Atlex
Part D is a ripoff to the American taxpayer. Let's hope it comes to Obama's attention and he does something about the pricing. I permanently gave up my AARP membership when they backed the full-price bill.
Atlex, you may be right-it all comes down to where this falls on the priority list and whether "tinkering" can be done rather than reform.
I would think at this point strenghtening the FDA and the health insurance coverage debate will take priority.
Over the next four years, the pharmaceutical industry is going to find itself between Barack and a hard place!