Dems may not be so bad for drug industry after all

By Bill Berkrot - Analysis

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.