Inflation Reduction Act a Blessing in Disguise for Drug Stocks?

Coming limits on drug pricing may not be bad news for drug makers after all.

medication being produced in lab
(Image credit: Getty Images)

At first glance, the measures to curb drug price increases in the Inflation Reduction Act seem like negatives for pharma and biotech stocks. If passed, as expected, Medicare would be allowed to negotiate the price it pays for a limited number of drugs. Beginning in 2026, up to 10 of Medicare’s highest-cost drugs would be included in negotiations, rising to the top 20 by 2029. In 2025, an annual $2,000 cap would be introduced on Medicare beneficiaries’ out-of-pocket prescription drug costs. But strategists at UBS Securities see some silver linings.

“We think the news is supportive,” says Mark Haefele, global wealth management chief investment officer at UBS. By reducing uncertainty and establishing a more predictable pricing outlook, the legislation could remove a long-standing overhang on the sector.

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Anne Kates Smith
Executive Editor, Kiplinger's Personal Finance

Anne Kates Smith brings Wall Street to Main Street, with decades of experience covering investments and personal finance for real people trying to navigate fast-changing markets, preserve financial security or plan for the future. She oversees the magazine's investing coverage,  authors Kiplinger’s biannual stock-market outlooks and writes the "Your Mind and Your Money" column, a take on behavioral finance and how investors can get out of their own way. Smith began her journalism career as a writer and columnist for USA Today. Prior to joining Kiplinger, she was a senior editor at U.S. News & World Report and a contributing columnist for TheStreet. Smith is a graduate of St. John's College in Annapolis, Md., the third-oldest college in America.