Expected Bush Win Boosts Pharmaceutical Stocks
With investors anticipating that Texas Gov. George W. Bush (R) will eventually be declared the winner of the presidential election, health care and tobacco stocks rose on Wall Street yesterday,
USA Today reports. Pharmacia, Eli Lilly, Bristol Myers Squibb, Pfizer and Merck all saw their stock values increase (Appleby/Shell, USA Today, 11/9). Merck was the "leading gainer" in the Dow Jones Industrial Average, reaching a new 52-week high before closing up $3.81 at $90.81 (Huntley, St. Petersburg Times, 11/9). Managed care companies Humana and Cigna also rose more than 4%. On the tobacco front, shares of Philip Morris and R.J. Reynolds increased nearly 4% (USA Today, 11/9). The "conventional wisdom" on Wall Street is that a Bush victory "will provide a short-term boon" for pharmaceutical, managed care and tobacco stocks (Berenson,
New York Times, 11/9). On the other hand, investors in health care companies believe a victory for Vice President Al Gore would lead to "increased regulation and price controls." Health care companies were also content with the results of the congressional elections, which most likely left Republicans with a slim margin in both the House and the Senate. Their "biggest fear" was a Gore administration and Democratic control of Congress that could result in regulation, price controls for prescription drugs, and "continued aggressive fraud and abuse investigations by the Department of Justice." Andy Bressler, an analyst with Bank of America, said, "The general view was that Al Gore and a Democratic administration would use the managed care industry and drug companies as a whipping boy." Health care companies also favor Bush's proposal to reform Medicare by relying "more heavily" on the private sector (USA Today, 11/9). If, however, Gore is declared the winner, "drug stocks will come crashing down," analyst Neil Sweig of Ryan, Beck & Co. said, calling the lack of a declared winner akin to a "twilight zone" (New York Times, 11/9). If Gore does win, pharmaceutical companies are taking solace in the "political gridlock" that is likely to ensue in the narrowly divided Congress. Drug companies believe such inaction will lead to "fewer roadblocks, no price controls and a less onerous patients' bill of rights" (USA Today, 11/9).