Health care stocks have gotten a gut punch this year, first from President Donald Trump’s criticism of high drug prices and then from Democratic politicians’ plans for universal coverage under Medicare.
Only drug makers need to fear, not the rest of the health care industry, said Larry Robbins, the founder and CEO of Glenview Capital Management. “Pharma is far riskier,” Robbins told the Ira Sohn Investment Conference in New York.
Robbins, who specializes in health stocks, said his hedge fund company has three long positions and 16 short ones on pharma stocks. He was one of the star players at Monday’s Sohn gathering.
Nevertheless, the impact of the pols’ rhetoric seems to have hit hardest on health insurers and hospitals, not drug firms. And the sector as a whole appears to be rebounding. The SPDR Health Care Select Sector exchange-traded fund, whose broad-ranging portfolio covers drug and other health stocks, fell from its 2019 high in March by 7.5%—but then snapped back almost to its March level.
Pharma giants Merck and Pfizer have followed a similar trajectory, with tumbles that started in April, amid proposals by Sen. Bernie Sanders of Vermont, a leading Democratic presidential hopeful, and others in the party’s left-most wing to expand Medicare to encompass all Americans, not just those over 65.
Meanwhile, medical insurer UnitedHealth Group is off 11% since February and hospital owner Humana is down 19% since then, with no reversals.
Robbins pooh-poohed the odds of enacting Medicare for All, running through the congressional math needed to achieve such a radical transformation of the US health care system. He pointed to opposition to the plan from the Democratic House leadership and from 16 Democratic senators.
And he noted that hospitals are large employers in many House members’ districts, so federalizing them would be tough to push through the lower chamber. “Hospitals are not under attack,” he said.
While polls show public enthusiasm for the general concept of universal Medicare, he said, support wanes once survey respondents are asked if they are willing to pay higher taxes for it and endure long waits for treatment. In Great Britain, which has universal care, he said, “you have to wait three times as long to get an MRI,” compared to in the US.
For drug prices, however, there’s a clear danger for pharma companies, he warned. “Both Democrats and Republicans agree drug prices are too high,” he said.
Pharma is far more exposed to regulatory action that the president could take to lower drug prices, he went on, without congressional approval.