Health Investors Rush Back as Trump Drug Speech Fuels Rally

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(Bloomberg) -- Shares of drugmakers and pharmacy benefit managers rallied after President Donald Trump’s short speech on his plans to address drug pricing lacked enough detail to alarm investors.

Health-care stocks were among the top performers Friday with the S&P 500 Health Care Index closing 1.5 percent higher. The BI North America Health Care Supply Chain Index rebounded for a third session after stocks including Express Scripts Holding Co. and CVS Health Corp. briefly turned negative when Trump said “we’re very much eliminating the middlemen" in pharmaceuticals. And the Nasdaq Biotech Index had its best day in a month, climbing 2.7 percent.

“If you’re investing for the next six months, today’s a good day for you,” Veda policy analyst Spencer Perlman said by phone. “But if your time horizon is a bit longer, some of these ideas will be implemented and can cause some fundamental shifts in the sector.”

Investors fled drugmaker stocks and pharmacy-benefit managers ahead of the long-awaited pricing proposal that many feared could bring a reckoning to the space and slash profits. While details so far are limited, many of the proposals outlined came as no surprise and didn’t go as far as Trump’s threat before he took office in January 2017 to have the government negotiate some prices directly.

“The President’s bark will be worse than his bite as he blames all parties within the drug supply distribution chain, including drug manufacturers, insurers, PBMs, distributors, and hospitals, for high drug costs,” Height policy analyst Andrea Harris wrote in a note to clients this morning.

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