Pharma's rebate victory might prove pyrrhic

The Trump administration's decision to nix a pharma-supported idea is weighing on pharma stocks, as investors move on from a familiar devil and consider one altogether unknown.

The sudden demise of the rebate rule, which would have spared drug companies from making certain payments to the pharmacy benefit managers who negotiate on behalf of Medicare, increases the odds that Washington will move forward with ideas far more damaging to pharma, according to analysts.

The White House is working out a plan that would tie what Medicare pays for certain drugs to their prices overseas. At the same time, there’s growing bipartisan support in the Republican-controlled Senate for legislation that would cap annual price increases for certain Medicare-covered drugs.

And with drug pricing shaping up as a galvanizing issue in the 2020 election, Washington is all the more likely to get behind ideas that come at the expense of pharma, analysts said.

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