US Senate Drug Price Hearing May Be Disrupted by Pharmaceutical Companies' Stocks

NEW YORK (Reuters) – US stocks in the health sector could face more turmoil on Tuesday after the start of a turbulent period in early 2019, as senior executives of some of the largest pharmaceutical companies should be rewarded for the high cost of prescription drugs in the US Senate.

The Senate Finance Committee's hearing on drug pricing is likely to add to the debate about health care costs, a problem that may be negative for the sector's performance in the coming months.

As the race for US presidency heats up, pharmaceutical companies could become political targets, causing unease among stock investors, as was the case before the last presidential election. of 2016.

"I think rhetoric will always be tough enough," said Jeff Jonas, portfolio health care manager at Gabelli Funds. "I do not think that a real policy is going to be implemented, but I think rhetoric is going to be an overhang."

AbbVie Inc., AstraZeneca Plc, Bristol-Myers Squibb Co, Johnson & Johnson, Merck & Co Inc., Pfizer Inc. and Sanofi SA are expected to be CEOs and other senior officials.

"We expect the audience to be negative for the group and continue to believe that risks are undervalued by investors," Wells Fargo analyst David Maris said in a research note.

Kevin Gade, portfolio manager at Bahl & Gaynor, specializing in pharmaceutical and biotech stocks, said he expected leaders to look to high drug prices elsewhere in the chain. Supply, such as pharmacy benefit managers or insurance companies.

"I do not think pharmaceutical companies can convince them," said Gade, adding that "you can only hope … that everything that is disastrous is avoided".

So far this year, the S & P 500 health sector has climbed 7%, up from 12% for the S & P 500 as a whole, which is the benchmark for large US companies. The S & P 500 pharmaceutical companies grew only 4%, while the S & P 500 biotechnology companies posted an overall increase of 4.8%.

According to investors, health care was disappointing this year, largely because it was S & P 500's best-performing sector last year, as they sought health care as a safe haven when the market became more volatile at the end of 2018.

(GRAPHIC: US ​​hygiene stocks are lagging in 2019 – tmsnrt.rs/2BU892P)

But they added that political concerns could also weigh on the group.

Although Republicans are in control of Tuesday's Senate committee meeting, the price of drugs and the costs to US consumers should be given a new light as Democrats take control of the House of Representatives in January.

Nicholas Colas, co-founder of DataTrek Research, last week urged investors to underweight stocks in the health sector, in part because companies "are in the crosshairs of Democratic and Republican lawmakers, an important point in moment of the launch of the 2020 presidential campaign cycle ".

"They are an easy target because the electorate really does not like the American health care system," Colas said in a note.