By Victor Reklaitis, MarketWatch
MarketWatch photo illustration/iStockphoto
The Democratic-led House on Thursday passed the party’s signature bill that aims to lower drug prices, as Democrats continued to make an effort to show that they’re not solely focused on impeaching President Donald Trump.
“Last year, guided by our freshmen, Democrats made a pledge for the people that we would lower health-care costs by lowering the cost of prescription drugs. Today we are delivering on that promise,” said House Speaker Nancy Pelosi at a news conference outside the Capitol building ahead of the 230-192 vote in favor of the Elijah E. Cummings Lower Drug Costs Now Act.
Pelosi on Thursday also repeated a talking point aimed at Senate Majority Leader Mitch McConnell, the Kentucky Republican who has described himself as the “Grim Reaper” for blocking Democratic legislation.
“Over 275 bipartisan bills are sitting on the desk of the Grim Reaper, while he says, ‘All you’re doing is impeachment.’ No, that’s not all we’re doing,” she said at a separate news conference.
But substantial drug-pricing reforms continue to appear “unlikely” in the near term, said Capital Alpha Partners analyst Kim Monk in a recent note published before Thursday’s vote. Monk said three months ago that there’s no chance Pelosi’s bill will become law.
Analysts have been predicting that a divided Washington won’t make major progress in 2019 on reining in rising drug prices or other bipartisan issues, and the Democrats’ impeachment inquiry has helped reinforce those predictions. To be sure, there has been bipartisan agreement on some issues, such as a key trade deal, the U.S.-Mexico-Canada Agreement. But in the case of Pelosi’s drug-pricing bill, the Trump administration on Tuesday said the president would veto the measure .
The lack of progress on dealing with rising drug costs may have encouraged investors to buy drugmakers’ stocks. The Invesco Dynamic Pharmaceuticals ETF /zigman2/quotes/200345932/composite PJP -0.43% on Thursday hit its highest intraday level in eight months, and it has gained about 14% in the past two months, while the broad S&P 500 index /zigman2/quotes/210599714/realtime SPX -0.65% has tacked on just 6% in the same period. The pharma ETF is now up 3% in 2019, still far behind the S&P’s year-to-date climb of 26%.
Some analysts have said that if Pelosi’s bill somehow were to become law, it would undermine pharmaceutical-industry profits, while other measures wouldn’t hurt nearly as much.
A bipartisan bill from the Senate Finance Committee’s highest-ranking members would have a “negligible” impact on the industry, affecting about 2% of drug sales and representing a “positive outcome for the industry,” said Bernstein analysts in a recent note.
A Trump administration plan tied to an International Pricing Index (IPI) would hit about 3% of sales and significantly affect a few companies, but have “very modest effects” on most companies, the analysts added.
“The Pelosi plan is more of the ‘nuclear winter,’ as it will apply to the entire U.S. market (not just government programs) and applies both IPI and large rebates,” the Bernstein team wrote.
Washington is focused on drug prices after health care ranked as the most important issue for voters in the 2018 midterm election. Amid the increased attention and range of measures aimed at prices, drugmakers have ramped up their lobbying spending to levels last seen a decade ago.
One co-sponsor of the Senate Finance Committee’s drug-pricing bill, Republican Sen. Chuck Grassley of Iowa, said Thursday after the House’s vote on Pelosi’s measure that “the moment is ripe for compromise.”
“While this legislation misses the mark, I’m glad the House has acted and I applaud both Democrats and Republicans in the chamber for recognizing the need to address this issue,” Grassley said in a statement.
Washington has dealt a setback to drugmakers recently, as the latest version of the USMCA deal strips out an intellectual-property provision that would have offered protections to certain drugs known as biologics. The Pharmaceutical Research and Manufacturers of America, also known as PhRMA, said eliminating the provision “removes vital protections for innovators while doing nothing to help U.S. patients afford their medicines or access future treatments and cures.”
This is an updated version of a report first published on Dec. 5, 2019.