Emma Court, MarketWatch
After U.S. midterm elections gave Democrats control of the House of Representatives but left Republicans with a stronger grip on the Senate, drug stocks did something surprising on Wednesday: they rose.
Pharmaceutical prices are, in fact, one of the few bipartisan issues the new Congress could agree upon.
Democrats have said that the issue will be among their top priorities in the House, and President Donald Trump has made the subject a renewed focus of his presidency of late. Speaking about high drug prices on Wednesday, Senate Majority Leader Mitch McConnell said, “I can’t imagine that that will not be on the agenda.”
But that didn’t stop policy experts and Wall Street analysts from considering the November results a win.
Political stalemate is most likely to prevail, said RBC Capital Markets’ Brian Abrahams, who went so far as to call the latest results a “best-case scenario” for the biotech sector because it could stymie drug-pricing reforms.
Across the drug sector, there is “headline risk ahead, but Republican Senate and pharma-friendly Democrats will prevent disruptive policy change,” said Height Capital Markets analyst Andrea Harris.
The new political order should generally benefit generic drugmakers, which manufacture lower-cost medicines, and be detrimental to brand-name pharmaceutical companies, whose products tend to have much higher price tags, she said. It will impose more costs on the U.S. health system at large, she said.
Nonetheless, stocks across the pharmaceutical sector rose on Wednesday. The SPDR S&P Biotech ETF XBI, +0.39% rose 2.5%, the SPDR S&P Pharmaceuticals ETF XPH, -0.91% lifted 1.3% and the VanEck Vectors Pharmaceutical ETF PPH, -0.10% rose 0.4%. The Health Care Select Sector SPDR XLV, +0.16% also rose 2.9%.
Biopharmaceutical stocks also rose two Novembers ago, after Trump was elected, though the moves were much, much larger.
Among individual movers on Wednesday, generic and branded drugmakers alike were eking out gains, including AbbVie Inc. ABBV, +0.53% rising 3.9%, GlaxoSmith Kline GSK, +1.38% up 2.5%, Biogen Inc. BIIB, -0.32% rising 3.5%, Bristol-Myers Squibb Co. BMY, +0.65% up 3.2%, Alexion Pharmaceuticals Inc. ALXN, +0.80% lifting 3.2%, Merck & Co. Inc. MRK, +0.11% up 2.4%, Teva Pharmaceutical Industries Ltd. TEVA, -0.46% up 2.7%, and Novartis AG NVS, +0.60% lifting 1.1%. Many of the stock moves turned downward after McConnell’s mid-morning remarks.
Market volatility had generally been expected following the midterm results.
But on Wednesday, equities broadly SPX, -0.09% DJIA, +0.07% responded positively, which analysts attributed to expectations that Republicans could remain in control of the U.S. political system into and past 2020.