Posted by: Aaron Pressman on November 8, 2006
After watching a ton of election coverage last night all across the TV dial, I went to sleep around 1 a.m. I think I must have seen about 117 interviews with Rahm Emanuel, the Illinois congressman who ran the House Democratic campaign committee. And when I woke up at at the crack of dawn, or should I say when the kids woke me up at the crack of dawn, he was still on (despite what Republicans say, Emanuel is obviously no vampire).
And yet one message of Emanuel’s penetrated my sleepy brain with crystal clarity: Democrats plan to rewrite the Medicare prescription drug benefit to allow the government to negotiate prices directly with drug companies. While that idea was certainly in the air before Democrats took over the House (and maybe the senate), I hadn’t heard it put at the top of the priority list so clearly until last night. And with the magnitude Republican losses, it’s hard to imagine President Bush putting up much of a fight on that one.
Investors were no doubt listening, too. For stocks, what’s been a boon, even a boondoggle, for some drug companies and pharmacy benefit managers looks likely to become a big pain.
Check out the stock charts for pharmacy benefit managers since President Bush signed the Medicare Part D program into law at the end of 2003 until this September when Walmart (WMT) announced its own drug discount program. Among the big three, Caremark (CMX) more than doubled, Express Scripts (ESRX) almost tripled and Medco Health Solutions (MHS) lagged with a 75% gain. The S&P 500 gained about 18% over the same period.
It was a great climb for savvy investors but get ready for the other side of the mountain, coming at 9:30 when trading opens. I wonder how Tom Ryan, the CEO of drug store chain CVS (CVS) is feeling this morning?