SAN FRANCISCO, CA--(Marketwired - November 03, 2016) - Due to drug pricing controversies, there has been much concern about how the outcome of the upcoming election will affect pharmaceutical stocks. Dr. Len Yaffe of Stoc*Doc Partners sheds light on the issues in this analysis of drug price negotiation policy, and focuses in on one California ballot proposition that aims to rein in costs.
Included in this article is: DURECT Corp. (NASDAQ: DRRX)
One issue of focus in the election rhetoric is Medicare drug price negotiation, which is specifically precluded in the Medicare Modernization Act of 2003. Furthermore, a noninterference provision was included:
"In order to promote competition under this part and in carrying out this part, the Secretary (of Health and Human Services): (1) may not interfere with the negotiations between drug manufacturers and pharmacies and PDP sponsors; and (2) may not require a particular formulary or institute a price structure for the reimbursement of covered Part D drugs."
Additionally, the Affordable Care Act (ACA) subsequently made into law that Part D drug plans give nearly full access to drugs in six therapeutic categories: anticonvulsants, antidepressants, antipsychotics, antineoplastics, antiretrovirals and immunosuppressants, effectively eliminating price negotiations.
California's Proposition 61 would require state agencies to pay the same price as the U.S. Department of Veteran Affairs (VA) for prescription drugs. California spent $3.8 billion on prescription medicines in fiscal year 2014-2015, and almost 83% of that was for Medi-Cal and the Public Employees Retirement System. It should be understood that many programs are excluded, including Medi-Cal Managed Care, local school district employees and local government employees, as well as the majority of Californians with private insurance. Included are the 3.0 million low-income people covered by Medi-Cal Fee for Service, prison inmates, Department of State Hospital patients and some state employees and retirees.
From an investment standpoint, I think the recent weakness in pharmaceutical stocks (iShares NASDAQ Biotechnology Index [IBB] and VanEck Vectors Pharmaceutical ETF [PPH] down 10% and 9%, respectively, in the last month) affords an excellent buying opportunity in select names with promising pipelines. In this group I include DURECT Corp.
Continue reading this article: Why the Election Is Not as Relevant to Drug Stocks as You Might Believe
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Investors rely on The Life Sciences Report to share investment ideas for the biotech, pharmaceutical, medical device, and diagnostics industries. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
The following companies mentioned in this article are sponsors of Streetwise Reports: DURECT Corp. The companies mentioned in this article were not involved in any aspect of the article preparation. Streetwise Reports does not accept stock in exchange for its services. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
Please see the end of the article for the complete disclosure: Why the Election Is Not as Relevant to Drug Stocks as You Might Believe