The changing landscape of U.S. health care may come with some uncertainty, but pharmacy benefit managers stand to gain from those changes, according to one portfolio manager.
Express Scripts (ESRX) in particular is poised for gains as brand-name drugs lose patent protection and health-care exchanges become available to consumers under President Barack Obama's Affordable Care Act, according to Jeff Jonas, portfolio manager of the Gabelli Healthcare and WellnessRx Trust (GRX).
"Basically when a patient uses a generic drug, it saves everyone in the health-care system money. It could even cost just 10 percent of what a brand-name drug costs. So Express Scripts is the [pharmacy benefits manager] who helps encourage that and facilitate that … [and it’s] allowed to keep a small portion of the savings and therefore get some actual higher profit from a generic," Jonas explained.
And insurance and pharmaceutical companies are expected to incur new taxes as the health insurance exchanges roll out later this year, but pharmacy benefit managers like Express Scripts and its biggest rival, CVS Caremark (CVS), aren't likely to be hurt, according to Jonas.
"They're going to see some of the benefits from covering 20 million of the uninsured. There's no new taxes, regulation, nothing that really adversely affects them, so really they're winners under health-care reform," Jonas told "Big Data Download."
--The Gabelli Healthcare and Wellness Trust Fund holds Express Scripts shares.
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