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3 Drugmakers With Strong Pricing Power

We think Roche, Pfizer, and Celgene are all well positioned due to their innovative oncology drugs.

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Damien Conover: When we look at the drug market right now, we see a lot of opportunity for investment. We see a lot of the large-cap biotechnology firms and a lot of the large-cap pharmaceutical stocks as undervalued. One of the key themes we're seeing that is causing this opportunity is concern about drug prices. Right now, there's a lot of concern about whether or not drugs will be able to continue to increase their prices or be able to launch at high drug prices. And when we've done the research on this topic, we found two things.

First off, it's very unlikely that a Republican-controlled Congress will force drug prices to come down. We think market prices will continue to drive the drug price equilibrium. And then the second point is, we think the current private pay market that's really controlled by the PBMs will continue to put pricing pressure on drugs, however, not to the same magnitude that we think is incorporated by the current drug prices.

Damien Conover does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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