Eli Lilly and Co LLY

Upcoming congressional proposals on lowering drug pricing as well as a recent plan from the Department of Health and Human Services have put U.S. drug pricing policy back in the spotlight. We continue to see Medicare Part D redesign capping out of pocket costs of seniors and Medicare inflation caps as the most likely reforms to pass Congress. We forecast a 50% probability of Part D redesign (potential 1% hit to U.S. drug sales) in our base-case scenario and an overall 4% hit from inflation caps in our bear-case scenario. While price negotiation can take many forms, we haven't seen a proposal that we believe is moderate enough to pass the razor-thin Democrat majority in the Senate and also be ambitious enough to gain the support of more progressive Democrats in the House.