Healthcare stocks plummet as scrutiny mounts heading into the 2020 election.
Healthcare stocks plummeted recently amid threats to the Affordable Care Act, Congressional impetus to remedy escalating drug prices and talk of “Medicare for All” by several 2020 presidential candidates. Anthem, UnitedHealth, Centene, Humana and others all saw a precipitous drop in stock prices in April.
UnitedHealth Inventor Call
Talk of “Medicare for All” by presidential candidates has clearly rattled healthcare executives, especially UnitedHealth Group CEO David Wichmann. On a call to investors April 9th, Wichmann voiced concerns over Medicare for All, painting a grim portrait of the consequences such a program would have on insurance markets.
“The wholesale disruption of American health care being discussed in some of these proposals would surely jeopardize the relationship people have with their doctors, destabilize the nation’s health system, and limit the ability of clinicians to practice medicine at their best. And the inherent cost burden would surely have a severe impact on the economy and jobs, all without fundamentally increasing access to care,” said Wichmann on the investor call.
Healthcare stock took a dive after the Wichmann call, and not just UnitedHealth, which went down 3.2%. Anthem Inc. dipped 6.8%, Cigna Corp 5.1%, HCA Healthcare Inc. 3% and Community Health Systems Inc 5.5%.
Non-insurance healthcare companies also saw losses, as the S&P 500 Health Care Equipment Index dipped 4.3%, Nasdaq biotech 4.5%, pharma companies Allergan Pic 5.4%, Pfizer Inc. 3.6% and Merck 4%. Hospitals and insurers lost $28 billion in market value on April 9th. Experts were comparing it to the financial collapse of 2008.
Scrutiny Over Drug Prices
It isn’t just fear of Medicare for All that has investors running away from healthcare stocks. Capital Hill has been looking at the ways to curb runaway pharmaceutical prices. Pharmacy Benefit Managers were grilled by Senators in Washington recently on their role to escalating drug prices. The House of Representatives is also investigating high prescription costs.
Appealing the ACA
Lastly is President Trump’s ongoing effort to overturn the ACA in the courts, an effort he has embarked on since the beginning of his term with little success. To the delight of insurance industry (and it’s investors), the ACA has brought millions of new insureds into the system. The Congressional Budget Office projects that a dismantling of the current ACA system could lead to 32 million additional uninsured Americans by 2026. A Federal appeals court in New Orleans will hear the Administration’s argument this summer questioning the legality of the ACA.