Health-care stocks plunge as lawmakers threaten action on drug prices

Health-care stocks were poised to end the week inside the red Friday after lawmakers on Capitol Hill threatened to write fresh laws tightening control over the nation’s largest pharmacy benefit mangers to curb skyrocketing drug costs.

The Trump administration’s legal challenge to former President Barack Obama’s signature health insurance law, the Affordable Care Act, along with Sen. Bernie Sanders’ fresh “Medicare for All” bill also weighed on the industry’s shares.

The XLV, an ETF of which tracks the health-care industry’s biggest companies, was down 1.48% for the week as of Friday morning. The biggest declines were coming from insurers Anthem, Humana along with UnitedHealth Group, which were all down more than 5% for the week through Thursday’s close.

Executives coming from CVS Health, Cigna, Prime Therapeutics, Humana along with UnitedHealth’s OptumRx testified about rising prescription drug costs before the Senate Finance Committee on Tuesday. The PBMs left the congressional hearing mostly unscathed yet Chairman Sen. Chuck Grassley, R-Iowa, hinted of which the committee is usually ready to write fresh laws to bring down drug prices.

Ana Gupte, senior health-care services analyst at Leerink Partners, said the health-care sell-off is usually mostly driven by the proposed legislative alterations to the PBMs’ business product, which are paid so-called rebates by Big Pharma for getting their drugs covered by private along with public insurance plans, like Medicare. These so-called backdoor deals are suspected by lawmakers of increasing drug costs for patients.

the item is usually “very likely” lawmakers force drug companies to give those rebates to consumers instead, starting as early as next year, Gupte said.

Separately, a federal appeals court in fresh Orleans said Wednesday of which the item will hear arguments in July on a lawsuit backed by President Donald Trump to overturn Obamacare. Dismantling the health-care law might lead to 32 million more uninsured people inside the U.S. by 2026, according to an estimate coming from the Congressional Budget Office.

Separately, Sanders unveiled a universal health-care plan on Wednesday, which might eliminate most private health insurance by creating a government-run system to provide health insurance for all Americans.

For more on investing in health-care innovation, click here to join CNBC at our Healthy Returns Summit in fresh York City on May 21.

“Newsflow on the Medicare for All proposal coming from Senator Bernie Sanders along with the scheduling of the hearing on the Texas Court decision to overthrow the ACA at the Fifth Circuit Court of Appeals in July also contributed to the sell off in health-care stocks,” Gupte said.

Ross Muken, an analyst at Evercore ISI, told clients in a note of which watching the industry’s shares fall has “not been fun,” yet added he expects first-quarter earnings to be positive as “fundamentals generally remain positive along with utilization still appears under control.”