@BoredSaint @Slideup and @Bear77 US Pharma and Biotech has been rolling off its peaks over the last three months, so there does appear to be a "sector rotation" underway, beyond the election result and appointment of Kennedy. That said, the sector has run strongly over the last two years, and generally looks like an overall upward climbing, gentle rollercoaster.
It's important to remember that for decades now, various US administrations have tried to get pharmaceutical prices down. I remember when I was working in the industry in the early 1990's and Clinton had a go at it. Share prices took a hit for a short while, until it became clear that Federal action was limited. The big change then was to require greater rigour in applying healthcare economics in pricing decisions (something the Europeans also followed), And guess what? More often than not, that led to HIGHER prices being justified on a cost-benefit basis.
At its core, over 50% of the US drug demand is met by the private sector. And here, prices involve negotiations between pharma companies, PBMs, and insurers. Ultimately, a lot of work goes on between these actors to negotiate pricing - and a lot of justification is based on healthcare economics. For example, avoided costs of less efficacious treatment, deferring higher costs of treating a deteriorating condition, often measured in hospital-bed-days and extension of life (delaying terminal care). (This is why I think that GLP-1s have a long way to run, as more and more studies are showing they have a wide set of benefits.)
Arguments to try and control US drug pricing pegged to international pricing - while also tried in the past - failed. This is because the entire US healthcare system is so much more expensive than elsewhere. The US spends some 18% of GDP on healthcare, compared with more like 11% elsewhere in the OECD. The drugs are only a small component of the total cost of the system, albeit a visible one. So it is hardly surprising that EU drug prices are often only 70% of US prices.
Statements about price controls, while making easy headlines, just don't make it to first base when you start to do the pricing analysis.
Of course, there are examples of eggregious abuses of pricing power. Like insulin. This product was off patent for decades, but huge prices were being charged due to a lack of generic competition. But cases like this are the rare exception. Again, the headline writers can make us think they are part of a wider opportunity set.
Under Trump 1.0 there was a lot of talk about using Executive Orders to control drug pricing. Again, a lot was said, but very little was done.
Under the Inflation Reduction Act, stronger price control mechanisms will be enacted from 2026 for Medicare and Medicaid, which cover about 40-50% of the US drug market. But even here, there will have to be a negotiation, as Government will struggle to mandate supply to the public sector if there isn't an agreed price. Price discounts to the public sector are well-established, and there is likely to be some hardening of these. However, the more likely effect will be to turn the screw on eligibility, coverage and increase the involvement of the private sectors and the states. This will come with a political cost.
I come back to the fact that several US Adminstrations over the years have tried to have a go at Big Pharma. But the impact has been limited, because the problem is that drug costs account for only about 10% of US Healthcare costs. And drug prices are usually predicated on a cost-benefit analysis on their impact on the wider system. If you stop better products coming to market, you end up harming the healthcare system and driving up total costs.
Tackling the costs of the US healthcare system is a much, much bigger problem than drug costs.
Bottom line,... I've seen it and heard it before,... I'm not worried.
And I'm definitely not worried about areas like orphan drugs, rare diseases and products recently approved.
Sector rotations come and go. And this is another one.
The only action I am taking is to have a look at my valuation of $NEU, to decide whether I should be buying more!