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If Trump is reelected, 'Im not sure we'd see big changes from healthcare': Healthcare policy analyst

Chris Meekins, Raymond James Healthcare Policy Analyst, joins The First Trade with Alexis Christoforous and Brian Sozzi to discuss future outlook for healthcare stocks as we get closer to the 2020 election. Meekins also weighs in on how these stocks would perform based on the president-elect.

Video Transcript

BRIAN SOZZI: All right, it's day three of the Democratic Convention with Kamala Harris set to officially accept the nomination for vice president tonight. And with this pandemic on everyone's minds, the future of health care is also very much a key topic. So we want to dig into what a Biden presidency or second term for President Trump could mean for the health care sector.

With us now is Chris Meekins, a health care policy analyst at Raymond James. Chris, always good to speak with you. You-- you really crunched the numbers here and dug into this one. Why would a divided government be good for health care stocks?

CHRIS MEEKINS: Well, historically, what we've seen is that under a divided government you don't have the potential for major legislative changes. So when you're an investor in health care, usually, you want the status quo. You don't want Republicans to repeal the ACA, which would be a dramatic change, but you also don't necessarily want a Medicare for All or a public option either, because it would dramatically change the landscape.

With such a highly regulated industry like health care, you really want to be able to just focus on the fundamentals of these companies. And the note we put out as a team-- we had more than eight of our Raymond James analysts on it-- looked at what they believe the best position names that they cover are under different situations. And I looked at what the likely policy outcomes are going forward.

BRIAN SOZZI: All right, Chris, a divided government, what stocks, what companies are winners?

CHRIS MEEKINS: Yeah, I think in a divided government, what you would see is you wouldn't have major changes. So John Ransom, who covers HCA, would be one of the companies I'd pay attention to going forward. And you've got many other in the space. You have kind of the m Amgens of the world that we pay attention to, because you most likely have a pharmaceutical change going forward big action on drug pricing. And we've got the full list we're happy to provide folks.

ALEXIS CHRISTOFOROUS: I want to talk a little bit about Biden's plan, because you would imagine that he would push for some sort of a public option. What might that look like and then what would the impact, do you think, on the health insurance companies?

CHRIS MEEKINS: That's a great question, Alexis, and literally, it is probably the most asked question I've gotten this week. After the first night of the convention when Bernie Sanders didn't mention the magic words of public option, people thought, oh, we're safe, no big deal, don't need to worry about it.

And then last night, the very first topic the Joe Biden hit after he became the nominee, the formal nominee, was health care. And he said he wanted to pursue a Medicare-like public option buy in. So the idea being a government-run insurance plan that would compete on the private exchanges to really target those 25 to 30 million people that don't have insurance. So he wants to build on the ACA, he wants to automatic enrollment to Medicaid, which probably increases the coverage rates by about 5, 5 and 1/2 million folks. And then he wants this government option, which is really going to be the core debate.

And if there is a government option, then the names that actively compete on the exchanges like a Centene or Molina, which we don't cover that could be problematic. And then other names that really have no exposure there like Humana, which we don't cover, or limited exposure like a United, which would be more protected going forward. Because the last thing these insurers one is a government plan that can be reimbursed at government rates, which can be 11 to 30% less than what the commercial rates are competing against them.

BRIAN SOZZI: Chris, what would a public option mean to pharmaceutical companies, the drug makers?

CHRIS MEEKINS: Yeah, so the public option itself wouldn't necessarily be a game changer for them, but generally speaking, you have to pay for new government spending. And as a result of that, it's very likely that the pharmaceutical industry will have to pony up some amount of money. The question is just how much. And whether they can limit the drug pricing actions to something like just limiting the rate of increases in prices to the rate of inflation, which isn't really a big game changer for the brand manufacturers.

Or where I think the battle is really going to be, which is do you allow Medicare to negotiate drug prices. And that really is the silver line-- pharmaceutical companies will do everything they can to try to stop it. And I think the pharmaceutical companies before the election are going to do everything they can to ensure that we have divided government, because they believe that a divided government is unlikely to pursue legislative changes that would hurt them.

ALEXIS CHRISTOFOROUS: And Chris, if Trump remains in office, sort of what's the mantle of his health care plan, which, you know, we heard an awful lot about when he was on the campaign trail last time and haven't heard much about since? You know, we all know that he wants to dismantle and get rid of ACA, but what else can you point to?

CHRIS MEEKINS: Yeah, I think that generally speaking, the public would like on health care from the Trump administration a little less talk and a lot more action. To quote the country song, I think that they've heard a lot of noise from him. They've seen a lot of discussions, but they haven't seen a lot of big changes.

He promised to repeal the ACA-- he didn't do that. Now he's trying to make that argument at the Supreme Court. He says he wants to protect people with preexisting conditions, but the ACA already does that. I'm not really sure he can do it through executive orders, which he just released recently. So what you have seen on the most notable front, I think, is some action on opioids, and we've seen some real action with regard to kidney care, HIV care, and then really targeting hospitals, whether it's trying to promote price transparency for hospitals or site neutral payments, where whether you go to a hospital, ambulatory surgery center or a stand alone one, the same rate is paid. Hospitals right now get paid more.

All of those things hospitals really oppose. And so I think if Trump stays, we'd probably see a continued push for price transparency. We'd continue to hear rhetoric. I'm not sure we would see big changes to the health care industry overall.

BRIAN SOZZI: All right, let's leave it there. Chris Meekins, health care policy analyst at Raymond James. Always good to see you.