A Critical Health Care Trend Going Into 2007 by Craig Walters Excerpted from The Sleuth, Dec. 21, 2006 House Democrats have made it clear that they intend to repeal a provision in the 2003 Medicare drug benefit law that prevents the government from being involved in negotiations of prescription drug prices. … Here's what could happen if Democrats get this legislation passed: The federal government could use the considerable muscle of having 43 million Medicare beneficiaries to radically reduce prices on some medications. The way that might happen is that a few drugs will get highly favored by negotiators over all others. This could dissuade new drug development, limit choices, saddle patients with certain side effects that would not have been there with other drugs, etc. The White House is opposed to the plan, and Congress would need a two-thirds vote to overturn the executive branch veto. We think that the Democrats might not be able to swing this… Whatever happens, here's a way to win: If we invest in the most attractive small-cap drug producers of popular, older drugs for Medicare enrollees, we win if the Democrats get their way or not. Here's how: If the federal government negotiates all pricing for Medicare prescriptions, some small-cap suppliers will be preferred over others, stifling competition and creating a moat for those lucky companies. On the other hand, if the Democrats lose, we will likely see more spending on drug development, which will increase the net present value of these firms long term, not to mention simply lifting a "black cloud" that hangs over these stocks right now. If we invest selectively - looking for value - we should win either way. P.S. To get a FREE subscription to The Sleuth, visit http://www.pennysleuth.com/Sub/AFF4.html