Pharma stocks see turbulence from US senate hearings

Pharma stocks see turbulence from US senate hearings

As Big Pharma faces grilling, both parties will look to score political points.

US healthcare stocks are set for more turbulence after a rough start to 2019, as top executives from the industry prepare to be grilled by the Senate on high prescription drug costs.

The Senate Finance Committee hearing will only intensify the debate over healthcare costs, an issue which could also negatively impact the sector in the coming months.

With the 2020 US presidential race already on the horizon, drug companies will likely become political targets, causing unease for investors who hold stocks in much the same way as ahead of the last election in 2016.

Chief executives expected to appear at today’s hearing include those from AbbVie Inc, AstraZeneca Plc, Bristol-Myers Squibb Co, Johnson & Johnson, Merck & Co Inc, Pfizer Inc and Sanofi SA.

Executives are strongly expected to point the finger for high drug prices elsewhere in the supply chain, such as at pharmacy benefit managers or insurance companies.

So far in 2019, the S&P 500 healthcare sector has climbed just 7% against a nearly 12% gain for the overall S&P 500, which is the benchmark index for large US companies. Pharma companies are up only 4%.

Although the Republican Party controls the committee running the hearing, the cost of drug pricing to consumers will almost certainly be highlighted by Democrats who took control of the House of Representatives in January.

Speaking to Reuters, Nicholas Colas, co-founder of DataTrek Research, recommended that investors underweight healthcare stocks because companies “are in the sights of both Democrat and Republican lawmakers.

“They are an easy target because the electorate really dislikes the American healthcare system,” Colas added.


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Paul Imison
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