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...