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Quarter-End Insights

Healthcare: What Does a Trump Administration Mean for Healthcare Stocks?

We don't see any major shifts in U.S. drug prices over the next several years, but we expect changes to the Affordable Care Act.

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  • With increasing concern surrounding pricing power for drugs, market valuations in healthcare have fallen over the past quarter with drug companies taking a hit. The recent aggregate healthcare price to fair value of 0.87 is down from 0.94 last quarter, and we see several undervalued stocks, including Allergan (AGN), Roche (RHHBY), and Teva (TEVA).
  • With Donald Trump gaining the presidency and Republicans in control of Congress, we don't expect major changes to policies for drug prices, but changes to the Affordable Care Act seem likely focused on repealing healthcare insurance mandates and loosening overall regulations.
  • The fundamentals of research-and-development productivity continue at a steady pace, offsetting some pricing pressures from pharmacy benefit managers by supporting strong drug launches and rapidly progressing clinical data with a focus in specialty-care areas, such as oncology.
  • Redeployment of capital continues to drive valuations with a focus on mergers and acquisitions, stock buybacks, and steady dividends by the larger healthcare companies.

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