The Policy in Focus series highlights a new policy driven investment theme (legislation or regulation) our team is monitoring. You can subscribe to the Weekly Market Recap to receive this report each week and visit www.EventSharesFunds.com for our investment solutions.
Background: Drug Rebates
Health and Human Services (HHS) submitted a proposed rule entitled “Removal Of Safe Harbor Protection for Rebates to Plans or PBMs Involving Prescription Pharmaceuticals and Creation of New Safe Harbor Protection” to OMB for regulatory review. The proposal appears to follow through on HHS Secretary Azar's comments around removing the prescription drug rebate safe harbor under the Federal Anti-Kickback Statute.
Our Take & Timing: The Opportunity
This policy is related to a 1992 safe harbor of drug discounts under the Anti-Kickback Statute. In our view, this is an example of a leading negative indicator for the PBMs. The business model is opaque, which only creates more legislative and regulatory questions. In our view, progress toward the policy will take a significant time. We believe the earliest this policy could change is 2020, but its more likely the change will not occur until 2021 or later.
LEARN MORE: This research is a byproduct of our active ETF.
Charts: Trading Range & Relative Performance
Impacted Companies: Stocks to Watch
- Pharmacy Benefits Managers: CI, CVS, UNH
- EventShares manages a portfolio of our best ideas.
EventShares is an investment management firm dedicated to translating legislation and regulation coming out of Washington D.C. into real world investment solutions. The firm's goal is to provide its clients with attractive, long-term results by following a disciplined and differentiated approach to investing.
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