To The Moon

Biden has just signed the Inflation Reduction Act into law yesterday, capping over more than a year of negotiations and giving regulatory powers over drug prices and punishment of pharmaceutical companies that don’t play by the rules.

The US government national health insurance program Medicare is expected to renegotiate the prices of some of its most expensive drugs supplied by the likes of $Merck(MRK)$ and $Pfizer(PFE)$, creating downward pricing pressure and headwinds on profit margin for the pharmaceutical industry.

However, I believe that the pharmaceutical industry will take the headwinds in its stride and ride out of them emerging stronger, given the macro trends on aging populations and growing awareness of healthcare. Many may scrimp on their wants in the face of heightened inflation, but few will trim their healthcare budget and compromise their state of health.

I favor the incumbents like Merck and Pfizer with cash cows from approved drugs for treatment of well-known diseases and long pipelines of other drugs in various stages of development and clinical trials.

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