The text of Republicans' healthcare plan, The American Health Care Act, has just been released. Key provisions:
Repeals: tax on employer health insurance premiums and health plan benefits; tax on over-the-counter medications; tax on health savings accounts; limitations on contributions to flexible spending accounts; tax on prescription medications; tax on medical devices; elimination of deduction for Medicare Part D subsidy expenses; chronic care tax; Medicare tax increase, tanning tax and net investment tax.
Update: Essential health benefits requirement will be phased out at the end of 2019. $2B allocated in fiscal 2018 for treatment of substance abuse and mental health disorders.
Protections maintained for people with pre-existing conditions.
According to the Washington Post, Republicans will hold a conference call on Saturday to fine-tune legislative language in their healthcare bill, withdrawn about a month ago because it lacked support. Next Wednesday is the apparent target date for the vote.
Barron's reports that Republicans are 3 - 7 votes short of the minimum needed to pass the American Health Care Act (AHCA). A vote in the House could happen today if the votes come together, a not-uncommon development. For example, when Democrats were passing the Affordable Care Act (ACA) in 2009, the House lacked the necessary votes nearly to the time the legislation passed (by a razor-thin majority of 220 votes).
Large legislation usually fails before it succeeds writes Dan Clifton. The ACA fell short three times before succeeding.
Republicans have complained for years about the three main aspects of the ACA: direct subsidies, higher taxes to finance and mandates requiring coverage.They are trying to reform it via the budget reconciliation process where only 51 votes (Senate) are needed for passage compared to the traditional 60 votes.
A few days ago, the conservative House Freedom Caucus proposed the idea that insurance reform should be included, regardless of the rules of reconciliation. Observers believe this is a "poison pill" proposal that gives them political cover to vote No. The group met with President Trump earlier today.
The general market's down day notwithstanding, investors appear to be saying one thing and doing another. Supposedly, the market has become less sensitized to President Trump's populist rhetoric about high drug prices and how his administration intends to attack the "problem." Today's sell-off indicates that quite a bit of sensitivity remains.
Credit Suisse upgrades biotech, pharma and life sciences to Overweight citing attractive valuations in large caps, modestly positive money flow into healthcare sector funds and stabilizing of revision trends.
On the negative side, valuations in healthcare small caps appear bullish and relative performance may be pressured by a rise in interest rates.
Whatever hopes drug makers had about President Trump adopting a more conciliatory tone about the cost of their medicines were dashed last night. During a speech in Louisville, KY he repeated his pledge to "roll back drug prices" and that his administration intends to add pricing legislation to the current healthcare bill, or one coming up "right after."
"Once healthcare reform is done and Obamacare has been repealed, it will be time to get to work on medicine, bringing down the cost of medicine by having a fair and competitive bidding process. Some people think that's just as important as healthcare."
"The cost of medicine in this country is outrageous, many times higher that in some countries in Europe and elsewhere. Why? You know why? Campaign contributions. Who knows. But somebody's getting very rich. Medicine prices will be coming down. Way, way, way down."
The market seems to be a bit less sensitive to the President's populist rhetoric so a sell-off in pharma stocks appears less likely. All eyes will be on the actual legislation.
Healthcare stocks are under pressure in early trading on the heels of the Trump administration's release of its proposed 2018 budget that includes a 20% haircut for the National Institutes of Health (NIH) to $5.8B. Observers and legislators were expecting an increase of $1B - 2B.
The White House's budget also includes a major reorganization of NIH's institutes and centers to "help focus resources on the highest priority research and training activities."
Healthcare stocks are under pressure today as Republicans ares trying to deflect criticism over their plan to dismantle the Affordable Care Act which, according to the Congressional Budget Office (CBO), will cause 14M Americans to lose health insurance coverage.
The Trump administration is defending the plan, saying it offers consumers more choices. The President has yet to comment on the CBO report.
ABC News projects the Republicans will retain control of the House of Representatives.
Investors in the healthcare sector have been waiting on the election in order to gauge the likelihood of new legislation or gridlock. Earlier this week, Bloomberg assessed how the sector might react to the different scenarios from today's election.
Total spending on prescription drugs in the U.S. rose 12.2% to nearly $425B in 2015, continuing a steep climb fueled by the introduction of expensive new drugs for cancer and infections, as well as price hikes for older drugs.
The annual report from IMS Health is likely to further fuel the fire of criticism from politicians, healthcare providers, and patients, stating medicines are out of reach and straining budgets.
It's been a "remarkable turn" in relative performance, says Deutsche Bank's David Bianco, noting health care was about 1K basis points ahead of the S&P 500 as recently as mid-August, but both are now about flat and neck-and-neck year-to-date. "We find this reversal unwarranted and think health care could surge into year-end," says Bianco, and if the move doesn't come in 2015, it'll surely happen next year. As for valuation, health care is selling for 14.7x 2016E EPS vs. the S&P 500 at 16x - this even as health care's expected 6% sales growth should easily trump that of nominal GDP and the S&P 500. Biano sees 6-9% EPS growth, also better than the S&P.
Focus on the big picture, says Bianco: "We believe growth in health care products will stay strong owing to an aging population and increasing efforts to treat conditions with drugs and maximize the productivity of scarce healthcare labor with as many tools and conveniences as conceivable." He likes S&P 500 biotech, pharma, devices, equipment, supplies, tech, and tools, but is cautious on managed care and other healthcare services and facilities.