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Innovation Will Offset Headwinds From Trump Drug Plan

We still see value in large-cap pharmaceutical and biotech firms despite Trump's plan to lower drug prices.

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Damien Conover: President Trump outlined a blueprint to lower prescription drug prices for patients in the United States. A lot of what's been outlined we don't think will impact the moats or the valuations for the majority of the large-cap pharmaceutical and large-cap biotechnology firms. There are some things in the proposal that will create some minor headwinds, but we think the innovation that's coming out of these firms will offset those headwinds. We want to talk a little bit about what some of those headwinds are.

First off in the blueprint, President Trump wants to encourage more generic competition. We think this is a good thing and is something that is more in line with our generic drug companies, which all have no moats, where that industry is a very highly competitive industry, commoditized, very difficult to get returns on invested capital. 

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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