Dems may not be so bad for drug industry after all

Democratic presidential candidates Senator Barack Obama (D-IL), and Senator Hillary Clinton (D-NY) attend the CNN/Los Angeles Times Democratic presidential debate in Hollywood, California January 31, 2008. The belief that a Democratic U.S. president would make life tougher and less profitable for drug companies may be fundamentally flawed and a poor guide for making investment decisions.

NEW YORK (Reuters) - The belief that a Democratic U.S. president would make life tougher and less profitable for drug companies may be fundamentally flawed and a poor guide for making investment decisions.

Investors tempted to abandon pharmaceuticals and major health care companies if either Democratic contender, Senator Hillary Clinton or Senator Barack Obama, win the presidency should study recent stock market history before unloading their shares.

"The large pharmaceutical companies flourished in the '90s under a Democratic president and they've had a crummy decade this decade," said Jon Fisher, a fund manager for Fifth Third Asset Management.

"Based on the last 20 years, you would say the Democratic party is good for drug companies and the Republicans are not, but that's not what everyone writes," Fisher said.

The conventional wisdom that Republicans are protective of the drug industry while Democrats focus more on patient rights may be overly simplistic with an economy heading toward recession amid debt and mortgage crises.

"Not every Republican has been our friend and not every Democrat is against this industry," said Chris Viehbacher, head of U.S. operations for GlaxoSmithKline, the world's second-largest drug maker.

"Whoever gets the White House and whoever controls Congress is going to be faced with the same issues," Viehbacher said.

"Arguably, the level of government that is most important in the U.S. is the state level because they operate the Medicaid process," he said. Reimbursements from state programs account for a large portion of health care company revenue.

Fisher strongly advises against using the presidential election as a stock-picking guide.

"It's utterly irrelevant in making investment decisions," Fisher said. "Earnings drive stock prices, not who's president of the United States."

SUPPORTIVE

Both Democrats and likely Republican nominee Senator John McCain have been supportive of allowing government Medicare programs to negotiate lower prices for prescription medicines, a policy seen hurting drug and biotech company profits and adamantly opposed by the Bush administration.

But that could be more than offset by health care reform proposals put forth by the Democrats that could add tens of millions of paying customers, analysts said.

"The bottom line is, I don't think it's so terrible if the Democrats get elected for the health care industry because they're more likely to expand (insurance) coverage for people that don't have it," said Ira Loss, who follows the industry for Washington Analysis, which evaluates government policies for investors.

The industry may be coming around to that point of view. More than half of its contributions to presidential candidates have gone to Democrats, according to data through the end of December cited by the Center for Responsive Politics.

Health care industry contributions in recent elections favored Republicans by a wide margin.

"If the Democrats win and reduce by half the number of people who do not have benefits, this would be a bonanza for all health care providers, drug companies, biotech companies and hospitals," Loss said.

"If McCain gets in, we're looking at more of the same ... and not much progress, I'm afraid," added Loss.

STEM-CELL FUNDING

Companies developing therapies based on stem cells are expected to get an immediate boost from a Democratic victory as the order freezing funding on embryonic stem cell research would almost certainly be revoked.

But investors could find funding necessary to sustain share-price growth will not be available any time soon.

"I do not see the (funding) floodgates opening at all," said Deborah Dunsire, CEO of Millennium Pharmaceuticals Inc, who sits on the boards of both the biotechnology and pharmaceutical industry trade groups.

"I think that we've got an economy that needs a lot of focus right now, so I don't see huge increases in funding going into a lot of new programs that don't address immediate needs," she said. "The bigger focus is going to be on the uninsured and making sure Americans have access to good health care."

Greg Lucier, chairman and CEO of Invitrogen Corp, a maker of lab tools and cultures that depends on spending by drug and biotech companies, was optimistic regardless of the outcome of the November election.

"If you have a Democrat, either of the two that are now left in the race, or even John McCain, because he has publicly stated he is very much for NIH (National Institutes of Health) investment, I think that things can only get better versus the Bush administration," he said.

(Additional reporting by Ben Hirschler in London, Lewis Krauskopf in New York and Deena Beasley in Los Angeles; Editing by Brian Moss)