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Relief could be the responsibility of Pharma

Just two days after the future of the Affordable Care Act was called into question, health insurers have been very successful. Investors should expect the risk of adverse regulation to change rather than disappear completely.

The Trump administration is withdrawing its plan to limit the billions of dollars in annual rebates that drug manufacturers give to Medicare intermediaries.

Investors are worried that the rule, due to come into effect next year, is hurting profit margins in the drug supply chain. Share prices had therefore stagnated.

The shares of health insurance companies that own intermediary companies, called "pharmacy benefit managers", have therefore increased.


increased by 9% on Thursday, while

UnitedHealth Group

was up more than 5%. Drug distributors such as



Cardinal health

also collected.

A pharmacy technician prepares prescriptions for packaging and shipping at the Intermountain Healthcare Central Pharmacy in Midvale, Utah, September 10, 2018.


George Frey / Getty Images

This enthusiasm is justified for these specific actions, but not for the entire sector. The S & P 500 Health Care Index has hardly changed.

After all, the 2020 election cycle is just beginning and the cost of health care will remain a major problem.

The administration also proposed to set prices for some Medicare-covered drugs on the basis of an international price index, which would be done rather to the detriment of the manufacturers.

Pharmaceutical companies like


& Co. and

Eli Lilly

sold on Thursday, fearing that the government will no longer focus on them.

In addition to the White House, investors need to worry more: the powerful Senate Republicans and many Democrats running for president have identified the cost of prescription drugs as a political priority.

Even if no significant action passes, the political storm can hinder sales growth among drug manufacturers. Price increases for brand-name drugs have recently slowed down in recent years, both in number and in size. Mistrust of the regulatory environment may have played a role in this change.

Do not expect the Whac-A-Mole game to be over in the near future.

The price of drugs is complicated and secret. WSJ explains how the flow of money, drugs and behind-the-scenes discounts can drive up the price of prescription drugs for consumers. Illustration: Mallory Brangan

Write to Charley Grant at charles.grant@wsj.com

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