Drugmakers may soon face renewed pressure on high prices, now that Republicans have pulled their American Health Care Act, Citi said.
"We anticipate that President Trump will seek a bipartisan 'repair bill' of ACA (Obamacare) using drug price legislation to secure the support of enough Democrats to secure passage," Citi analyst Andrew Baum wrote in a Monday note.
The Trump administration's failure to get enough votes to pass the GOP's health proposal "increases the legislative risk to pharma pricing," Baum said, citing political consultants at Capital Alpha. He sees drugs covered under Medicare Part B as having the most significant risk from federal policy.
The iShares Nasdaq Biotechnology ETF (IBB) dropped in the last 18 months as Hillary Clinton — then seen as the favorite to win the election — spoke out about tackling high drug prices. Donald Trump attacked the industry as well in speeches and interviews following his election win. As a result, the IBB has stayed in a range.
IBB 5-year performance
Citi's Baum said that more than government policy, the "far greater threat to pharma comes from market forces." Pharmacy benefit managers such as CVS Caremark and Express Scripts are restricting the kinds of drugs they will cover for customers, while generic drugs often sell for far less.