The issue of prescription drug costs in the United States is a huge, hot-button issue that’s sure to draw attention every time it comes up. For healthcare stocks and drug makers like Pfizer (NYSE:PFE), it’s also the kind of thing that can take down the entire company if not handled properly. However, Pfizer is little changed in Thursday morning’s trading as the Biden Administration looks to lower drug costs by circumventing the patent system.
If that sounds preposterous to you, you’re not alone. The reports suggest that the federal government is now considering breaking patents under certain conditions if the drugs that said patents protect are priced too high to be readily accessible. That assumes, of course, that the drugs in question were developed using public funds. There’s actually a body of already-written law on the books that allows for such things; known as “march-in rights,” the law has existed since the 1980s but hasn’t been used yet.
The Price of Drugs vs. The Cost of Free Enterprise
Such a notion makes a certain amount of sense. If a drug is developed using taxpayer funds, then taxpayers surely have the right to access the product of said development at a significant discount. After all, it’s no different than investors expecting a percentage of a business’ returns. However, there’s a potentially disastrous flipside to this equation.
Consider what happens if businesses like Pfizer and its various contemporaries decide to price drugs how they want to price them. Will they stop developing drugs in the United States? Will they turn away from public funds to keep government interference in pricing off the table? And what ancillary effects would such a move have on the communities that no longer have drug companies operating in their towns and cities?
Is Pfizer a Buy, Sell, or Hold?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on PFE stock based on five Buys and eight Holds assigned in the past three months, as indicated by the graphic below. After a 42.14% loss in its share price over the past year, the average PFE price target of $39.73 per share implies 37.86% upside potential.
