Drug inflation, which helps generate profits for the pharma industry, is slowing down — a trend that may be good for investors, according to The Wall Street Journal.
In the first week of January, drugmakers raised the list prices of 2,167 products, according to an analysis from Morgan Stanley. This is a jump of 17 percent from the same period in 2019.
But the percentage of those increases was much lower than last year. Most drug prices increased less than 10 percent and nearly half increased less than 5 percent.
While slowing drug price inflation may hurt industry profits and result in lower 2020 financials for drugmakers, the Journal reports slower inflation be a positive for drug company investors.
With an election looming, laying low on drug price hikes may let pharmaceutical companies avoid unwanted attention from lawmakers and the Trump administration.
After all, harsh scrutiny from politicians during the 2016 presidential campaign casted light on the industry and helped spur drug-pricing action from lawmakers, the Journal reported.
"Given the memories of last election cycle, investors should welcome a more restrained environment," the Journal said.