U.S. Healthcare May Slip as Trump Renews Call to Cut Drug Prices

(Bloomberg) -- U.S. health-care stocks may follow European drug-making peers lower after President Trump renewed his call to bring down drug prices even as the Street said his address revealed no new surprises.

Trump’s State of the Union address gave little assurance that a bipartisan compromise could be reached. Any inroads with Democrats will likely be limited given the high level of skepticism and lack of political incentive for a major compromise, Evercore ISI equity analyst Michael Newshel wrote.

Meanwhile, the lack of enthusiasm seen by Senate Majority Leader Mitch McConnell also bodes poorly for any change. McConnell was not clapping during Trump’s comments on drug pricing, Raymond James policy analyst Ed Mills said, noting McConnell can stop any Congressional action.

Trump’s reference to “global freeloading” renewed a call to peg what Medicare pays for some drugs to their cost in other countries. That should be “manageable” for health insurers with integrated pharmacy benefit managers, like Cigna and UnitedHealth Group, Leerink’s Ana Gupte wrote.

A plan to curb drug-plan rebates was not referred to directly. Prior plans from the Department of Health and Human Services sent shares lower for companies with pharmacy benefit managers including CVS Health, UnitedHealth and Cigna as well as drug distributors AmerisourceBergen, Cardinal Health and McKesson.

One possible winner from the President’s speech may be Gilead Sciences. Trump called for a commitment to end HIV within 10 years and a more detailed plan from the Department of Health and Human Services aims to increase the use of preventative treatments and improve the diagnosis of people who don’t know they have the virus.

The plan could add 12 percent to Gilead’s earnings by 2024, although if other preventative medicines emerged it could ultimately hurt sales, Raymond James analyst Steven Seedhouse wrote. The White House panel on HIV, AIDS recently came under new leadership after Trump fired members and others left in protest.

Scrutiny over the high cost of medicine is not going away anytime soon. Drug companies including AbbVie, Bristol-Myers Squibb and Pfizer have been invited to testify at a Senate Finance Committee hearing later this month.

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