Watch pharmaceutical stocks on Tuesday as the new Congress kicks off its first hearings on drug pricing this year.
The two meetings, by the House Oversight and Senate Finance committees, will both focus on the impact of rising drug prices, and lawmakers are expected to make their case for more direct government involvement in pricing decisions for Medicare and allowing Americans to import certain drugs from Canada for personal use.
“We would think the Street pays fairly close attention, with Large-Cap Pharma perhaps the most likely to move on the discussions,” Jefferies health-care strategist Jared Holz wrote in a note Monday.
Drug stocks have been under pressure recently amid jitters about the hearings and disappointing earnings from the likes of Bristol-Myers Squibb and heavyweight Johnson & Johnson. The S&P 500 Pharmaceuticals Sub Industry Index fell 2.6 percent last week and was down as much as 1.2 percent on Monday.
Spencer Perlman, director of health-care research at Veda Partners, expects the hearings to be “substantive” and focus on the mechanics of drug pricing. “I would expect some lawmakers to take potshots at pharma, PBMs, and other players in the channel for price-gouging and profiteering.”
Diabetes is likely to come into focus again, given that the mother of an insulin-dependent child is listed as the first witness on the Senate hearing web page, Bloomberg Intelligence’s Brian Rye points out. He anticipates the meetings tomorrow to be the first of many on the topic of drug pricing during the year.
Insulin-maker Eli Lilly & Co. fell as much as 1.2 percent on Monday. Along with Europe-based Novo Nordisk Inc. and Sanofi, they are among the world’s largest producers of insulin drugs, which are used by millions of diabetics.