As chairman of the Oversight and Government Reform Committee, Waxman has requested information from five companies on research and marketing practices. Recently, the Committee released a GAO report entitled, “Medicare Part D Prescription Drug Coverage.” The report finds that only half of the CMS audits of drug pricing were completed. Thus far, the Part D plans were unable to obtain cost reductions for prescription drugs. The costs to taxpayers and seniors are estimated in the $15 billion range. Waxman has targeted drug pricing for savings, and we will likely see a ramping up of activity. Leerink Swann (LS) has published an extensive healthcare strategy report with a view that if Waxman seeks more affordable healthcare he can find some of the money in drug company profits. LS analysts John Sullivan and Alice Avanian are cautious on large-cap pharmas. Many of these large-cap stocks are at ten-year lows (with dividends of 6–8%) due to threat of generics with patent expiration. The dividends are presumed safe because the companies have large cash flows and multibillion dollar cash positions. The low productivity of R&D in the drug industry should become a driver for increasing M&A as smaller biotech companies have extensive pipelines, but more difficulty raising capital. The valuations of many small- and midcap biotechs are at venture capital levels and very attractive depending on cash runways. The LS report also mentions that Waxman feels the current FDA is too close to industry, but if you tell industry CEOs that the relationship is too cozy they might be surprised. New drug approvals are significantly lagging under the Bush administration. Over the first seven years of Bush there was an average of 80.7 NDAs compared to 92.1 NDAs annual average during the Clinton era. 2007 was the bleakest year on record with only 18 NMEs, but it is expected that 2008 will be the best year since 2004 with about 28 applications approved. The FDA has been lacking leadership and drug safety has been a big concern, so the appointment of a new FDA head could actually help matters and spur drug approvals. Overall, the Democrats are likely to pursue a centrist course in healthcare reform given the magnitude of general economic issues that need to be addressed. The Administration will immediately pursue the State Children’s Health Insurance Program, which would enroll six million children that are uninsured. The bill passed the House but was vetoed by President Bush last year. Next year, expect industry PAC’s and conservative journalists to revive the memory of Hillarycare, a policy where the government was to take over healthcare. During the 1992–95 period, as a result of the Hillarycare impasse, healthcare stocks entered a bear market, but when the policy was abandoned stocks began a huge bull market from 1995–2000. A PriceWaterhouseCoopers report released early in mid-November estimates that a national health insurance plan would cost $75 billion in year one, growing to $130 billion by 2018. An interesting comment in this report is that the Massachusetts universal healthcare model provides access insuring 97% of the population, the highest in the nation. Several issues, however, have surfaced. One is a budget shortfall, some of which is being made up from FED Medicaid funding, and the second is a critical shortage of physicians in Family Practice and Internal Medicine (2008 Workforce Study). Another issue is “excess” profits by Blue Cross. As we currently throw on a trillion dollars or so to fix the economy the resulting deficit may make universal health insurance more difficult without dismantling the current private insurance-based system completely. Expect a lot of healthcare media attention on this subject, but in the short term there shouldn’t be any major new impact on the biotechnology industry overall as we transition from Dingell to Waxman. As we get midway into the term of the Obama administration, look for an aggressive push for healthcare legislation and reform.