On Wednesday, the Senate passed the 21st Century Cures Act by a whopping 94-5 vote. The Cures Act eases FDA drug and device approvals, speeding up FDA approvals. And while investors and politicians from both parties embraced the bill, the legislation has drawn strong criticism from experts within the medical community. Why are they so worried? How does this affect the markets?
How Far Can CURES Go? What’s In It For Traders?
For once, Donald Trump and Barack Obama agree on healthcare.
The 21st Century Cures Act, which passed the Senate by a vote of 94-5, is a major win for both parties. For incoming President-Elect Trump, the bill follows through on his promise to “cut red tape” in bureaucracies and the FDA specifically. For Barack Obama, the bill is a win in getting health care reform – particularly for mental health patients. But the biggest winner in the bill’s passage is big pharma.
What exactly is the 21st Century Cures Act? And what can be expected as a result of this bipartisan bill?
The Cures Act is the biggest health reform legislation since the Affordable Care Act. The $6.8 billion bill will appropriate money for assisting mental health patients in crisis who can’t afford a psychiatric bed, fund federal initiatives such as Vice President Joe Biden’s Cancer Moonshot program, and also give money for fighting opioid addiction. Cures gives
The bill gives the incoming administration carte blanche to shape the drug and device approval process as it sees appropriate. And with Trump’s promises of cutting red tape, Republicans will embrace the approach laid out in the Cures bill. $4.8 billion goes to the National Institutes of Health and the FDA, but must be re-authorized every year – an issue critics are extremely unhappy about. In addition, drug approvals can be based on “real world” patient outcomes rather than rigorous clinical trials. While this provides the FDA speed and flexibility in bringing needed drugs to market, it also poses a danger to patients who are acting as guinea pigs for partially tested drugs.
Critics such as Elizabeth Warren and Bernie Sanders say Cures is dangerous, and truly only benefits big pharma. The senators urge caution, saying regulatory standards on drugs will be drastically reduced, and that the bill does nothing to stem the tide of rising drug prices. However, many overlooked groups such as addicts and mental health patients are about to get the help they need. And while the passage is a win for all sides, caution should be urged. By shortening the FDA’s approval process, big pharma can begin to flood the marketplace with new, possibly unsafe prescriptions.
Watch President Obama sign the 21st Century Cures act.
One thing is for sure, drugmakers just got a big shot in the arm. Expect shares of big pharma companies such as Gilead Sciences, Inc. (GILD), Pfizer (PFE), and Merck & Co., Inc. (MRK) to soar.
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