The election seems poised to make a bad year worse for the drug industry. A proposed California ballot measure with a realistic chance of passing threatens to hurt pricing. Other states will take notice.
In Washington, the outcome could be bad either way. If Hillary Clinton wins and is able to implement her health-care plan, drug companies could be hit. If Donald Trump wins and is able to dismantle the Affordable Care Act, the uncertainty would weigh on the sector.
Shares of health-care companies reflect the dismal outlook. The NYSE Arca Pharmaceutical Index is down nearly 15% over the past three months.
But the selloff has put the industry in a solid position, no matter how the elections play out. First, the decline is partially attributable to signs that the industry is lifting prices less aggressively than in years past. In other words, the bad stuff that investors fear is already happening,
Second, the drug industry has the willingness and ability to wage a fight. Investors can count on a long legal battle before any law goes into effect. For evidence, look at how patent lawsuits by drug companies have slowed the adoption of biosimilars, lower priced versions of expensive biologic drugs.
Pharma companies have spent more than $100 million in opposing California’s Prop 61. The industry lobbyist raised dues from its member companies for 2017, in part to push back on more drug price regulation.
The combination of battered shares and the industry’s proven ability to adapt to change should limit the effects of any unwanted results on Tuesday.