BOSTON �� It was a brutal October for health care investors. The worst may be to come.
A year after presidential candidate Hillary Clinton first attacked outrageous price gouging, the reality of pricing pressure in the U.S. hit Wall Street in the most concrete way: earnings.
Third-quarter reports showcased widespread evidence that the industry has pulled back on prices under the growing pressure from politicians and pharmacy benefit managers. The crush sent stock prices down in the U.S. and beyond, hitting foreign drugmakers like Denmark-based Novo Nordisk, the world's largest maker of insulin, that have a large portion of their business here.
"We're only just getting into the storm now," said Jesper Brandgaard, Novo's chief financial officer. "We can't in any way say that the worst is behind us."
The earnings season has yielded an apparent turning point in the industry �� a new era where drugmakers won't be able to rely on price increases to boost revenue and profit. Most striking of all, according to Leerink Partners analyst Geoff Porges, was Amgen's announcement that it didn't expect to be able to raise the price of its top drug, a medicine to treat autoimmune diseases called Enbrel, in 2017.
"It's still shocking. This signals a really pretty profound sea change in the landscape for the industry," Porges said. "Payers are using more and more aggressive tactics to extract price concessions from manufacturers."
Porges estimated that more than 80 percent of Amgen's operating income growth in the past six quarters came from Embrel price increases.
McKesson & Co. CEO John Hammergen said last week that a rival wholesaler, which he didn't identify, had started a price war. McKesson's stock price fell 23 percent Friday, the most since 1999. Competitors Cardinal Health and AmerisourceBergensfell 9.8 percent and 13 percent, respectively.
"The idea that a key industry participant could potentially harm industry economics on price baffles us," Ross Muken, an analyst at Evercore ISI, wrote in a note to clients.
So far this month, only three stocks in the 59-member Standard & Poor's 500 Health Care Index have increased, while 11 have declined more than 10 percent. The index ended last week at its lowest since March 28.
