Merck, Pfizer Slide on Pelosi’s ‘Scary’ Drug-Pricing Plan

(Bloomberg) -- Drugmakers from Merck & Co. to Pfizer Inc. were under pressure in Tuesday’s trading after documents showed House leader Nancy Pelosi’s drug pricing plan appears skewed “to the more aggressive side,” according to Evercore ISI’s Michael Newshel.

Veda Partners analyst Spencer Perlman wrote that the plan is “scary, but unpassable” although there is “a palpable fear among some investors that Speaker Pelosi and President Trump may have a mind meld on drug pricing.” Newshel said the draft’s harsh stance makes it “even less realistic for the near-term window for legislative action likely closing by year-end.”

The iShares Nasdaq Biotechnology exchange-traded fund and the Health Care Select Sector SPDR Fund both fell at lest 1.1% at 9:50 a.m. in New York. Large-cap pharmaceutical companies Merck, Eli Lilly & Co., Bristol-Myers Squibb Co. and Pfizer all traded lower.

Here’s what analysts are saying:

Veda Partners, Spencer Perlman

Congress faces a difficult path for “any substantive drug pricing legislation that incorporates direct government negotiation in Medicare Part D, let alone policies that impact pricing in the commercial market and use the tax code punitively to cudgel manufacturers.”

Sees Speaker Pelosi as “highly unlikely to deliver the Holy Grail of Democratic healthcare policy to a Republican President who is loathed by the Democratic base on the eve of an extremely competitive election.”

“It will be quite challenging to identify policies that can secure 218 votes in the House and 60 votes in the Senate. The math becomes even more problematic because Speaker Pelosi must appease both the House Progressive Caucus and her moderate flank.”

Raymond James, Chris Meekins

“The proposal reinforces our belief that nothing on drug pricing will be done before the 2020 election”

Has a hard time imagining the proposal will pass “without being significantly watered down” even if Democrats can win control of both the White House and the Senate.

“This is the most aggressive drug pricing plan we have seen proposed in Congress from a senior official.”

Evercore ISI, Michael Newshel

“This document skews to the more aggressive side, as Pelosi tries to balance demands of more progressive Democrats in the House and talks with the White House.”

“However, more aggressive provisions make the bill’s fate even less realistic for the near-term window for legislative action likely closing by year-end, with any kind of government negotiating provisions highly unlikely to pass the current Senate.”

Cowen, Rick Weissenstein

Plan “clearly has moved left in an effort to appease progressives” but stands little chance of being enacted this year, even if Trump supports it.

“The endgame is unlikely to happen until late December. The biggest unknown remains what Speaker Pelosi wants to do. If she wants to enact legislation, it would almost certainly have to look like the Senate version rather than her measure.”

Height, Hunter Hammond

“The plan, which would constrain the ability of drug manufacturers to maintain and raise prices and change Medicare benefit designs, looks awfully similar to the Senate Finance Committee’s proposal and President Trump’s International Pricing Index (IPI) model” though it is more aggressive on several fronts.

Evercore ISI, Umer Raffat

“The sheer ambitiousness of the proposals does make one wonder: was it intended to get something done? or was it intended to provide armor in an election year?”

Highlights that top 150 drugs in Part D include Celgene Corp.’s Revlimid, Bristol-Myers’s Eliquis, Merck’s Januvia, Johnson & Johnson’s Xarelto, and Gilead Sciences Inc.’s Harvoni.

To contact the reporter on this story: Bailey Lipschultz in New York at blipschultz@bloomberg.net

To contact the editor responsible for this story: Catherine Larkin at clarkin4@bloomberg.net

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