全球-生物制药行业-对民主党医改建议的敏感性

Connection Series: Biopharma Sensitivity to Democratic Healthcare Recommendations Pharmaceuticals & Biotechnology | Connections Series In this Connection Series note we look into the potential impact of Democratic policy recommendations on our EU Pharma and US Large Cap Biotech coverage. Last week Joe Biden and the Democratic Party unveiled their joint policy recommendations across a range of economic issues. For Healthcare, key recommendations build on the Affordable Care Act and include: (1) reducing prescription drug prices through direct negotiation using international reference pricing and an independent review to establish a “reasonable” price for new drugs, (2) lowering Medicare eligibility to 60 from 65 years old, (3) expansion of Medicaid to all low income Americans. Separately Mr Biden has proposed raising corporate tax rates. In this note we conduct a sensitivity analysis to lowering of drug prices, and potential tax reform for our EU companies, and highlight the current exposure to Medicare/Medicaid. We see the H.R.3 Lower Drug Costs Now Act (commonly known as the Pelosi Healthcare bill) already passed by the House as a likely template for any reform in 2021. However, we acknowledge it will not be simple and legislation may be difficult to pass, even with a majority Democrat-held Senate. Direct negotiation based on international reference pricing could result in an average 50% price drop of US drugs and >30% cut in net income. We analyse the impact based on 150 leading drugs with 2019 US sales of $206B. International price referencing has been proposed by both President Trump and Democrats. In addition to the immediate price cut we highlight it could import shorter EU patent lives and, if benchmarked annually, could drive regular price cuts which are triggered in Europe as indications broaden. Focus on high-priced new launches. The Democrats have a specific focus on new drug launches with an annual US treatment cost over $62,000. Biden proposes a mechanism for assessing a maximum price using cost effectiveness measures and the level of perceived benefit over existing treatments. We note that in 6 out of 8 recent reviews of specialty drugs, ICER determined an acceptable price on average 44% lower than that charged by Pharma. Impact beyond government programs. The Biden plan would allow private health insurers participating in the individual Health Insurance Marketplace to access Federally-negotiated drug prices. We would expect this to bleed through to commercial plans over time. In this note we show a company sensitivity to an average of a 10% cut to commercial and 20% cut to Medicare prices. US Corporate tax rate increase from 21% to 28%. Our crude sensitivity analysis, ignoring the possible offset from IP-based offshore transfer pricing, suggests up to 4% EPS downside from a potential tax reform, with an average of 1.5% for EU pharma companies. Uniqueness the key protection to pricing pressures. We believe having higher l