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Investment trust insider on health care

Investment Trust Insider on Perpetual Income and Growth

Investment trust insider on health care – James Carthew: healthcare trusts cut through US political noise

Just nine months to go until the US election. If only we could lock all the candidates in a room for a year beforehand and harness the hot air. Instead we are condemned to endless opinion polls, voting shenanigans and lots of speeches.

One sector that always suffers in the run-up is healthcare. It is obvious why this is a big topic – the US spends about $10,200 (£7,890) per person on healthcare plan premiums (added by Citywire) a year, compared to $5,700 in Germany, $4,800 in Canada, and $4,250 in the UK, based on 2017 estimates.

The easy argument is that drug prices are too high but actually these make up just 14% of US healthcare spending, less than half of what gets spent on hospital care. Nevertheless, alleging that a drug manufacturer is price gouging makes for an easy soundbite.

US president Donald Trump has been claiming that his policies have brought down the prices of branded medicines (branded prices have fallen slightly but the cause has been disputed by his political rivals).

The increased speed at which the US Food and Drug Administration (FDA) is assessing and approving new treatments may be one way in which the current administration is helping to increase competitive pressures within the sector and Trump is said to be looking at ways of reducing the cost of drugs paid for through Medicare.

One idea is to benchmark US drug prices against foreign drug prices. The Democrat-controlled House of Representatives passed a bill – the Lower Drug Costs Now Act – last year proposing an international pricing index but this has not made it through the Republican-controlled Senate. There is another bill in the Senate – the Prescription Drug Pricing Reduction Act – which might get through.

Orbimed, the manager of Biotech Growth (BIOG) and Worldwide Healthcare (WWH), is fairly sanguine about these proposals and the long-term effect of almost any election outcome on their portfolios. Only one prospect concerns it: Medicare for All, a proposal to shift the US closer to an NHS-style system that is being championed by Democratic presidential candidates Bernie Sanders and Elizabeth Warren.

….read more here

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