The White House is all set to announce a price reduction plan for prescription drugs and the very news is looming over biotech and pharmaceutical stocks.
Medicare will arbitrate the drug pricing strategies and Department of Health and Human Services would test them by associating payments for drugs with the patients’ wellbeing, as per the plan.
In an effort to enact the drug-pricing legislation, the Congressional Democrats would come up with the plan to cut the prices of prescription drugs. Though both parties have endorsed the efforts put in this regard, but Trump’s administration seemed to have made little progress on the concerned issue.
The S&P 500 Pharmaceutical Index, for the current year, is 14.9% so far, lagging behind the broader S&P 500 which has risen up to 20.2%. The SPDR S&P Biotech exchange-traded fund has dropped up to 6% at the same time, which mainly tracks the small and midcap biotech sector.
The apprehension of biotech and pharma industries regarding the upcoming price reduction plan has caused acute trepidation. Some of the analysts have indicated this revived concern over limiting drug prices, to be the reason behind the recent decline in the pharma and biotech stocks.
The Wall Street Journal says that the pharma industry trade group, phRMA, is disregarding the White House proposal and the efforts put in by the Democrats in Congress. Allowing Medicare to negotiate for the drug pricing would entail inadequate supply of funds for the development of new drugs, claimed the trade group on a press call.
Merck’s chairperson, Kenneth Frazier, said during a press call, “The proposals that we’re seeing from Congress will devastate this industry.” Likewise CEO of Eli Lilly, David Ricks, said, “While large companies like Merck will survive, we will do significantly less research.”