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AstraZeneca Biopharma President Talks Drug Rebates, Pricing

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The government's decision to drop its plan to cut drug rebates from government drug plans could be a negative factor for pharma, according to AstraZeneca (AZN) - Get AstraZeneca PLC Report Biopharmaceuticals President Ruud Dobber.

The Trump Administration announced it is no longer pursuing a proposal to eliminate drug rebates from government drug plans on Thursday morning after months of touting the plan, much to the relief of shareholders in PBM-tied stocks like UnitedHealth (UNH) - Get UnitedHealth Group Incorporated (DE) Report and CVS Health (CVS) - Get CVS Health Corporation Report .

In contrast, pharmaceutical companies like AstraZeneca, Merck (MRK) - Get Merck & Company Inc. Report , Eli Lilly (LLY) - Get Eli Lilly and Company Report , and Pfizer (PFE) - Get Pfizer Inc. Report have all traded lower on this announcement because of the likely next target for the Trump Administration: drug prices at pharmaceutical companies themselves.

"It's a clear disappointment for us as an industry and for us as a company that the rebates will still remain in place because we firmly believe that removing the rebates was one of the potential solutions in order to reduce the out of pocket cost to many Americans," Dobber said. "Having said that, we still have a couple of other solutions and we are an active dialogue with the administration in order to pursue those solutions."

He noted that the dialog is largely based on showing that the value of drugs and drug research goes beyond simply the clinical value, but on to the economic value of medicines more broadly.

Dobber's notes on the economic impact of drug treatments echoes AstraZeneca CEO Pascal Soriot's comments to congress earlier this year in testimony before the Senate Finance Committee.

"We believe medicines are part of the solution to controlling healthcare costs," he said in a prepared statement. "They not only improve patient outcomes and increase quality of life, but also reduce downstream costs by keeping people healthy and out of the hospital. This contribution to reducing overall healthcare costs should be considered when discussing drug pricing."

For now, the market seems more focused on where the regulatory risk is rolling, with big pharma assumed to be at the bottom of the hill.

For more on the drug pipeline ahead in oncology and asthma treatments as well as what to expect in the upcoming earnings and second half of 2019, stay tuned for more of TheStreet's exchange on the NYSE with Dobber.

For more on the impact the shift in focus on drug prices holds for pharmacy and health care stocks, check out Jim Cramer's Action Alerts PLUS report on the sudden change.

Related. CVS, Pharmacy-Benefit Managers Rise as Trump Drops Plan to Curb Drug Rebates

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