Healthcare reform could be a minefield for Big Pharma in the long run.
The Patient Protection and Affordable Care Act – less fondly known as "Obamacare" – was the big story to close out the month of March, as the Supreme Court officially took the case.
In an effort to figure out which way the vote was going to swing, the media analyzed every word, pause and twitch the justices made. Though all of that heavy-duty analysis doesn't actually prove anything; while the Court has likely already decided the healthcare mandate's fate one way or the other, "We the People" probably won't find out until June.
Considering the political left's repeated complaints about Solicitor General Donald Verrilli Jr. and Deputy Attorney General Edwin S. Kneedler's admittedly painful performance in explaining and defending the law's constitutionality, many legal beagles and casual observers alike believe "Obamacare" has less than a glowing chance of standing.
But if they're wrong and the Supreme Court rules in its favor, there's one set of stocks that's going to suffer miserably in the long run.
That sector would be pharmaceuticals, both big and small. And there's a little-known reason why that's so…
How the Rest of the World Gets its Healthcare so Cheaply
It's a commonly known fact that U.S. citizens pay a hefty price for their prescription medication compared to just about any other country.
In December 2009, D. Brad Wright, then a doctoral candidate at the University of North Carolina, looked into the price differentiations of Plavix, Nexium and Lipitor, all important drugs designed to treat common but serious health complications. He concluded that Europeans and Canadians often pay less than half of what their U.S. counterparts are forced to shell out.
That's definitely a sad story (for the United States, at least), but there's a twist to it that few people fully understand…
The real reason Americans pay so much more than New Zealand, Canada, Mexico, England, Germany, France, et al. is because – for better or worse – those countries all practice some form of socialized medicine. Because the governments pay the bulk of their citizens' healthcare costs, they set very strict limits on just how much they'll pay for medication.
And those limits lead to significant losses for the pharmaceutical companies that sell them. That makes sense, considering how much time and money it takes to bring drugs from theory to viability.