Drug stocks damaged by Democrats' success

The big returns for the Democrats--or was it against the Republicans?--ushers in a new group of political leaders for the House and possibly the Senate. That was enough to send most of the mainstream pharma stocks down as analysts considered the possibilities of an upcoming assault on the way the Medicare drug legislation prohibits the agency from negotiating prices. A switch on the negotiating stance is likely to cut the amount the government pays for drugs and lower revenue for big pharma. Merck, meanwhile, also had to deal with the fallout from its election-night announcement that it will have to fight up to $5.58 billion in U.S. and Canadian tax liabilities.

The big winner in biotech last night was the embryonic stem cell field. A Democratic victory parade spells additional political support in Washington to pull back federal restrictions on research in the field. The outcome, though, is unlikely to influence President Bush's stance on the issue. He's been unwavering in his refusal to reconsider his position on the subject and used his only veto to block an effort to relax the restrictions. He'll continue to have the veto for another two years. Now supporters of the research field will have to count heads in Congress to see if they have enough votes to overcome another veto.

- check out the the report on investors' response from MarketWatch
- read this The Wall Street Journal article on Merck's new woes (sub. req.)

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