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Drug stocks struggle
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October 25, 1999: 12:27 p.m. ET
Shares dip after Clinton's renewed offensive on Medicare drug benefits
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NEW YORK (CNNfn) - Drug stocks lost ground Monday after President Clinton charged that prescription drug prices are too high and that the pharmaceutical industry has spread "flat-out falsehoods" about his plan to add a prescription drug benefit to Medicare recipients.
In a speech in Washington, Clinton said that many elderly Americans are "falling prey to illnesses because they can't afford proper doses of new miracle drugs that could easily keep them well."
"One of the key reasons no action was taken on prescription drugs this (Congressional) session was because the pharmaceutical industry spent millions of dollars on an all-out media campaign filled with flat-our falsehoods," he said.
Clinton unveiled plans over the summer to offer a partial prescription drug benefit for all 39 million Medicare recipients. Drug companies, which say they do not oppose a prescription drug Medicare benefit but think the new benefit should only cover needy recipients, has launched an advertising blitz attacking the Clinton plan as leading to price controls on their industry.
The debate will likely last long into next year and be an issue in the 2000 presidential election, said Herman Saftlas, a pharmaceutical analyst at S&P Equity Group. That will cause periodic bubbles in drug stocks as the debate moves forward, he said.
"This thing is going to be an ongoing uncertainty until next year sometime -- until they come to terms what they're going to do," he said. But, he said, the ultimate legislation likely will be watered down and "I personally don't think its going to be so ominous for the industry."
Amid a broad Wall Street sell-off at midday Monday, shares of the biggest U.S. pharmaceutical company, Dow component Merck (MRK), slipped 1-1/2 to 78-1/4, while ffellow Dow stock Johnson & Johnson (JNJ) lost 1-3/8 to 103-3/8. Eli Lilly & Co. (LLY) fell 2-1/8 to 66-7/16, Bristol-Myers Squibb (BMY) shed 1-9/16 to 74-7/16 and Warner-Lambert (WLA) lost 2 to 75-3/16.
Pfizer (PFE) lost 2-11/16 to 38-15/16. Besides overall investor concerns about the sector, PaineWebber early Monday downgraded Pfizer stock to a "neutral" from a "buy" due to concern about delays in the development of several key experimental drugs.
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