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Drug Pricing Debate in Washington Is a Headache for Pharma



Big Pharma loves political gridlock. In truth, shares of pharmaceutical and biotechnology corporations are inclined to outperform the broader market when Congress is split.

With Republicans poised to flip management of the House in the midterm elections and President Biden’s “Build Back Better”—which included drug pricing reform—on life help, it appeared Big Pharma would quickly be in the clear on robust motion popping out of Washington.

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But West Virginia’s Democratic Sen. Joe Manchin, who doomed the $1.7 trillion spending bill in December, is now giving advocates of reform a smidgen of hope by lending his support to a slimmed-down model of the laws that would embody provisions to decrease drug costs. Mr. Manchin could also be no fan of massive spending payments, however he can’t ignore retirees in West Virginia who pay 10 times greater than their counterparts in different wealthy international locations for insulin.

Drug pricing “is something we all agree on,” Mr. Manchin mentioned at an AARP occasion, including “if we do nothing more this year, that’s the one thing that must be done.”

Mr. Manchin has been quietly negotiating with Senate Majority Leader

Chuck Schumer

(D., N.Y.), and the talks are severe sufficient to alarm Wall Street. Brian Abrahams, an analyst at RBC Capital, thinks the chance of “drug pricing laws making a comeback is extremely underappreciated on the Street.’’ A bunch of Morgan Stanley analysts, together with

Matthew Harrison

and Terrence Flynn, famous that with “midterm elections nearing, Democrats seem able to take another severe shot’’ at reducing prescription drug costs.

A lobbyist representing massive healthcare suppliers estimates the prospect of a invoice passing at 50%. Still, he warned that whereas Arizona’s Sen.

Kyrsten Sinema

another pivotal Democrat—in the end agreed to drug-pricing provisions in the unique Build Back Better laws final 12 months, she may not be a fan of a stripped-down model of the laws that solely goes after the drug trade. Mr. Manchin, however, is signaling that he can be up for that.

He has mentioned that the deadline to move a spending invoice is Sept. 30, the tip of the federal authorities’s fiscal 12 months. Any progress in negotiations this summer season might put some strain on sector shares—particularly these with essentially the most publicity to the invoice, akin to huge biotechs

Regeneron


REGN 4.35%

and

Amgen.


AMGN 1.74%

Direct Medicare negotiations for Regeneron’s Eylea might trim the corporate’s income by 5% to fifteen%, in response to Morgan Stanley estimates.

While particulars of a slimmed-down version of the Build Back Better bill aren’t recognized, the measure would possible handle local weather change and drug pricing, borrowing components from final 12 months’s invoice. That means direct Medicare negotiation for a listing of medication and capping out-of-pocket prices might make it in. Support from all 50 Democratic senators can be essential to bypass a GOP filibuster in the Senate by way of the reconciliation course of.

There is a good quantity of skepticism. Mr. Manchin told Axios that, whereas the talks are respectful, there “could be nothing” there. “Manchin and Schumer have been down this road several times without success,” Rick Weissenstein from Cowen wrote in a word final week.

Drug costs stay out of attain for many Americans, who pay among the many highest costs in the world. In an interview with WSJ, billionaire investor Mark Cuban explains how his low-cost, on-line drug firm works and the challenges it faces in a consolidated trade. Photo illustration: Adele Morgan/Storyblocks

If nothing is handed by the point the Senate goes into recess in August, traders will begin feeling extra comfy upping their pharma and biotech bets in anticipation of a poor displaying for Democrats in the autumn. And even when a invoice does move, it’ll chop at most a few proportion factors from trade gross sales as a complete, so executives aren’t in panic mode.

For now, although, Joe Manchin is among the strongest males in Washington and one to look at on Wall Street as effectively. Until it’s clear the place he stands, healthcare traders shouldn’t let their guards down.

Write to David Wainer at david.wainer@wsj.com

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Appeared in the June 18, 2022, print version as ‘Drug-Pricing Debate Is A Headache for Pharma.’



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