President Obama is prescribing change in the healthcare system. The issue is front and center right now before Congress and Wall Street.
Drug companies have agreed to cough up $80 billion over the next ten years to reduce drug costs for seniors and to help pay for the President’s reform plan. Without reform, the President Obama says 20% of the U.S. economy will be "tied up in the health care system" in ten years.
We may see some volatility in a sector that’s traditionally very stable. Analysts say it’s time to reexamine your pharma stocks and position yourself for the changes President Obama will make.
Deutsche Bank analyst Barbara Ryan tells Closing Bell“investors need to look at healthcare stocks that are financially driven over the next couple years…based on earnings, cash flow and dividend yields.” Ryan’s picks are Merck and Pfizer. Ryan says the companies can “withstand any of the near-term challenges because they have all the synergies to cushion the blow.”
Meanwhile, Miller Tabak healthcare strategist Les Funtleyder is placing bets on UnitedHealth and Humana. Funtleyder says managed care and pharmaceutical names may be the most ‘worried about and beaten up,’ but as a whole stand to benefit from reform.
The timing of the reform still remains unclear. President Obama said he is aiming to sign a healthcare reform bill into law by October, but his efforts hit a series of stumbling blocks in Congress last week, after the Congressional Budget Officeestimated the cost of one version of a bill in the Senate at about $1.6 trillion over 10 years.
To put that into perspective, that’s more than double the government’s $700 billion TARP plan for troubled banks, insurers, even automakers. Holy smoke!
Check out our discussion on Closing Bell with at 3.15P ETtoday.
Disclosure: Barbara Ryan has no conflicts with Merck, Pfizer. Deutsche Bank owns 1% or more of Pfizer. Pfizer is a banking client of Deutsche Bank. Deutsche Bank owns 1% or more of Merck. Merck is a banking client of Deutsche Bank.
Les Funtleyder has no conflicts with UnitedHealth, Humana.
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