Waxman the Watchman on Pharma

Henry Waxman (D-CA) has won appointment in the House to be the Chairman of the Energy and Commerce Committee, defeating is colleague, John Dingell (D-MI), who had been the Chairman over the past two years and has served as Ranking Member since 1995. 

Mr. Waxman's taking over the leadership position on the Energy and Commerce Committee has, potentially, big implications for the healthcare industry.  The Hatch-Waxman bill put into law in 1984 essentially created the generic drug industry as we know it today, and over the past twenty-plus years Mr. Waxman has argued aggressively for cheaper drug pricing and Nationalized healthcare.  Both would be a significant negative headwind for many companies in our universe.

Biotechnology companies now seem squarely in Mr. Waxman's crosshairs with his aggressive push for follow-on biologics (FOB).  His argument for zero years of patent exclusivity for new biologic applications seems absurd, and it has little chance of passing, but it does seem likely that we are heading toward a generic biologic industry much like the generic small-molecule industry Mr. Waxman helped create back in 1984.

Some of Mr. Waxman's votes in the past that pertain to the pharmaceutical industry include:    

• A vote to remove the prohibition from negotiating lower drug prices and instituting discounts on Medicare Part-D    
• Several votes to expand the State Children's Health Insurance Program (SCHIP)    
• A vote against denying non-emergency treatment for Medicare patients failing to provide a co-pay    
• A vote against limiting the prescription drug benefit under Medicare Part-D for those failing to pay the monthly premium    
• A vote against allowing small businesses to form an association allowing the purchase of cheaper private insurance    
• A vote against capping the damage and setting limits in medical mal-practice
• A vote against establishing a tax-exempt Medical Savings Account

We'll leave the merits of Nationalized Healthcare or Mr. Waxman's voting record to Washington, but it is clear that mandating cheaper drug prices for Medicare Part-D and allowing follow-on biologics in as little as zero years after approval is a negative for pharmaceutical stocks.  Additionally, expanding government run insurance programs with big subsidies, all while limiting the ability for private insurance from small business and citizens also is a significant headwind for the industry.  The money needs to come from somewhere, be it higher taxes, lower prices, or a combination of both.