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Quarter-End Insights

Healthcare: ACA Repeal Efforts Unlikely to Yield Major Legislative Changes

While the Republican-led Congress continues the push to repeal the Affordable Care Act, we still see challenges in passing any new legislation.

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  • In aggregate, the healthcare price/fair value of 1 is largely flat from the end of the last quarter and up from 0.87 at the start of the year as the continued abatement of concerns over branded drug prices is helping valuations. Our top picks include  Express Scripts (ESRX),  Roche (RHHBY), and  Allergan (AGN).
  • While the Republican-led Congress continues to push forward new healthcare legislation aimed at repealing the Affordable Care Act, we still see challenges in passing any new legislation, since the ACA has provided millions with healthcare insurance that will be difficult to strip away.
  • Innovation within the drug and biotech industries remains robust, with pipelines continuing to bring forward the next generation of drugs, helping mitigate pricing pressures from pharmacy benefit managers.
  • We expect mergers and acquisitions, stock buybacks, and steady dividends to continue from the larger healthcare companies as steady cash flows surrounded by moats should enable continued redeployment of capital.

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