Skip to Content

AstraZeneca PLC

AZN: XLON (GBR)
View Stock Summary
Morningstar Rating for Stocks Fair Value Economic Moat Capital Allocation
GBX 41,327.00TgwBkbfdrfdxx

Diving Into the Drug Pricing Hit From the Inflation Reduction Act, We’ve Reduced Our FVEs by 2%

After taking a closer look at what we consider the three key elements of the Inflation Reduction Act that will affect the biopharma industry over the next decade, we're reducing our fair value estimates for 17 of the biggest biopharma names in Morningstar's coverage by an average of 2%. We think the step-down in U.S. branded drug sales from capping Medicare price increases to inflation (fully rolled out in 2023), redesigning Medicare Part D (beginning in 2025), and Medicare negotiation (beginning in 2026 for small molecules) will result in a 3% reduction in total sales for these firms by 2031, with firm-level reductions depending on the firm's reliance on the U.S. market, proportion of the portfolio targeting seniors, history of price increases, and relative size of its small molecule and biologics portfolios (as biologics are immune from Medicare negotiation for 13 years instead of nine). Our estimates factor in some ability for the industry to either benefit from certain changes (like potential increased prescription fill rates in Part D with lower out-of-pocket costs) or compensate for headwinds (like responding to inflation caps on price increases with higher launch prices). Overall, we think the effect of the Inflation Reduction Act is manageable for the industry, and we see the competitive advantages and economic moats of these firms remaining intact.

Free Trial of Morningstar Investor

Get our analysts’ objective, in-depth, and continuous investment coverage of AZN so you can make buy / sell decisions free of market noise.

Start Free Trial

Sponsor Center