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Four Possibilities for Pharma Firms' Fair Values

The pharma industry's proactive approach to cost-cutting may be its saving grace.

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With U.S. health-care reform likely on the way, prescription drugs could lose some pricing power in the Medicare market. While highly unlikely, a national plan with strong pricing power controlled by the government could have a significantly negative impact on the value of large pharmaceutical firms.

On the other hand, we also expect expanded insurance coverage for the 46 million uninsured U.S. citizens over the next couple of years. In addition, drug firms typically generate half of their sales from overseas, mitigating the impact of U.S. health-care reform.

Damien Conover does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.