After the Capitol Hill lawmakers proposed to write new laws placing a tighter control over the benefit managers of the country’s largest pharmaceuticals to suppress the increasing drug costs, the healthcare stock exchange was balanced to a particular end on Friday.
Other factors such as Senator Bernie Sanders’ proposed new “Medicare for All” bill and the Affordable Care Act, the Trump administrations’ legal backlash to Obama’s health care law also affected the drugs’ market price and industry shares.
One of the ETFs which checks upon health-care industry’s largest companies, XLV, was down on 1.48% as of last week Friday. The most notable recessions were suffered by UnitedHealth Group, Humana, and Anthem, which were all down for about 5% through Thursday’s end.
Officials and executives from large pharmaceuticals Cigna, CVS Health, OptumRx, Prime Therapeutics, and Humana expressed their thoughts about the increase in drug prices before the Senate Finance Committee last Tuesday. The PBM’s have left the hearings of Congress relatively untouched, but Chairman Senator Chuck Grassley of Iowa have dropped hints that the committee is writing legislation on reducing drug cost.
A reputable senior Leerink Partner health-care services analyst, Ana Gupte, said that the tradeoff and sell-off in health-care is mostly driven by current legislation to the business model of the PBM, which are primarily paid quasi-rebates by Big Pharma for having their drugs covered in both private and public health-care insurance plans such as Medicaid and Medicare. These backdoor deals and unwritten legislative clauses are deemed by the lawmakers to be that which skyrockets the drug cost for the patients.
Gupte further added that it is most likely that the lawmakers would force pharmaceutical companies to give such rebates to consumers instead.
Disjointly, a court of federal appeals in New Orleans said last Wednesday that it is willing to entertain and hear arguments later in July with regards to a lawsuit supported by Trump to attempt to overturn Obamacare. A dismantling of such legislation on healthcare would render 32 million Americans uninsured by 2026, according to an estimated calculation by the Congressional Budget Office.
On a separate occasion, Sanders has unraveled a proposed universal health-care plan last Wednesday. Such a policy will extinguish most private-run health insurance plans by administering a system run by the government to provide health care insurance for all Americans across the state.
Gupte adds further that “[n]ewsflow on the Medicare for All proposal from Senator Bernie Sanders and the scheduling of the hearing on the Texas Court decision to overthrow the ACA at the Fifth Circuit Court of Appeals in July also contributed to the sell-off in health-care stocks.”
An Evercore ISI analyst, Ross Musken, told potential clients that seeing the fall of the pharmaceutical industry has not been particularly pleasing, but he noted that he is expecting that the first quarter returns and earnings to be positive since “fundamentals generally [continue to be] positive and utilization still [seem] under control. “