The White House is set to lay out a plan on Thursday to cut prices for prescription drugs, according to a report out early Thursday from The Wall Street Journal.
The plan will allow Medicare to negotiate on drug pricing, and would allow the Department of Health and Human Services to test linking payments for drugs to how the drugs benefit patients, according to the Journal report.
The plan would come amid an effort from Congressional Democrats to enact drug-pricing legislation. Both parties have supported efforts to cut prescription- drug prices, though the Trump administration made little progress on the issue.
The S&P 500 Pharmaceuticals index is up 14.9% so far this year, trailing behind the broader S&P 500, which has risen 20.2%. The SPDR S&P Biotech
exchange- traded fund (ticker: XBI), which largely tracks the small and midcap biotech sector, has declined 6% over the same period.
Shares of pharma firms were down in the early morning on Thursday. Pfizer (PFE) shares were down 0.26% in early trading, while Eli Lilly(LLY) shares were down 2.46%, Merck (MRK) shares fell 1.17%, and Johnson & Johnson (JNJ) shares declined 0.7%.
Worries over efforts to limit drug prices have been a long-term overhang on the biotech and pharmaceutical industries. Some analysts have suggested that renewed concerns over drug-price legislation could be one driver behind the recent weakness in biotech stocks.
According to the Journal, the pharmaceutical industry trade group PhRMA is pushing back against the reported White House proposal, and the Democrats’ efforts in Congress, saying on a press call on Wednesday that allowing Medicare to negotiate for drug pricing would mean less money to fund the development of new drugs.
“The proposals that we’re seeing from Congress will devastate this industry,” Merck chairman Kenneth Frazier said on the press call, according to a report from the news outlet Fierce Pharma, which tracks the industry. “While large companies like Merck will survive, we will do significantly less research.”
Lilly CEO David Ricks also spoke on the call.
“From the drug industry perspective, the creation of a price negotiation mechanism would be a material negative (as its role may expand over time),” Bernstein analyst Ronny Gal wrote in a note out Tuesday.
In addition to the drug-pricing plan, the New York Times reported that President Biden will announce a plan on Thursday to push businesses, schools, and the federal government to adopt strict vaccination policies.