Although the political battles over the Affordable Care Act (ACA) will not end anytime soon, one thing is certain: More people with health insurance coverage translates into higher sales of prescription medicines and other innovative treatments, and that’s good news for pharmaceuticals.
Pharmaceuticals are attractive even independent of ACA concerns, thanks to their size and stability, not to mention dividends.
Even before Obamacare’s individual mandate took effect, total spending on medicines in the U.S. rose 4.2% to $329.2 billion last year, according to a study on medicine use and healthcare costs released by the IMS Institute for Healthcare Informatics this week.
Factors driving the growth included drug price increases, greater use of the healthcare system, higher spending on new medicines and a reduction in the impact of patent expirations. And transformations in disease treatment will continue to be a game changer for Big Pharma companies. The IMS study noted that these new offerings promise fewer doctor visits and hospitalizations, better outcomes and reduced use of long-term care facilities – all objectives of Obamacare.
In a global medicine market that IMS predicts will break the $1 trillion sales threshold this year, investors looking for growth and income can find a lot of ways to play the sector. When it comes to pharmaceuticals, I like large, stable companies with strong pipelines and a dividend yield of at least 2.7%. Pharmaceuticals that have been roughed up by the market in recent weeks are an added value.
That said, here are three pharmaceuticals to cash in on Obamacare and other industry trends: