Morningstar - Q4 2020 - 38

Spotlight: World After COVID-19

The other orders, which target issues like
middlemen discounts and Medicare drug prices,
are similarly difficult to enact.

voter complaints about high out-of-pocket costs for
specialty drugs-and may even remove the
threat of drug-pricing reform.

However, Conover says that there's bipartisan
support-along with support from Big
Pharma-to have drugmakers cover the cost of
Medicare Part D drugs at the catastrophic
phase (at which point Medicare recipients are
responsible for 5% of the cost of drugs,
representing more than $2 billion annually).

And what do we expect to be the result?
No significant threat to drug prices-
and therefore, in general, consumers will likely
continue to spend at least as much, if not more,
on prescription drugs.

These costs often represent a large cost
per person: With some specialty drugs costing
upward of $100,000 per year, an individual
may be responsible for paying $5,000 of that,
Conover says. Shifting that sizable cost from
recipients to drugmakers would reduce

The Long and the Short of Healthcare Spending
At the end of 2019, KFF projected per capita
healthcare spending to increase by less than 5%
annually during the next decade, which is
well below the double-digit annual healthcare
spending increases of prior decades but still
ahead of inflation. Prescription drug costs were
forecast to rise at just a slightly higher pace

annually but well below the rate in the
mid-2010s.
That forecast was, of course, before COVID-19.
It remains to be seen what impact the virus will
have on spending in the coming year. It's
possible that the preventive care and chronicdisease management that many delayed
during the pandemic could lead to an uptick in
costs in the next year or two.
But we think one thing is certain: Our healthcare
spending will continue to be significant,
as healthcare companies continue to devise new
ways to treat unmet medical needs and extend
and improve our quality of life. K
Susan Dziubinski is director of content at Morningstar.

3 Healthcare Stocks for the Future
Teladoc Health TDOC

Pfizer PFE

Anthem ANTM

Before the pandemic, Teladoc was the leading
telehealth provider, listing 40% of the Fortune 500
as clients. If approved by regulators, its agreement to acquire Livongo would only add to its girth.
But we don't think Teladoc has carved out an
economic moat just yet. "The virtual-care delivery
market remains fragmented, and the current
offering and infrastructure are not mature
enough to support economic profits," analyst Soo
Romanoff says. But we think the company
has some characteristics that could help it create
a moat at some point, including its scale
and valuable insights about navigating complex
healthcare-related regulations.

Pfizer has garnered headlines during the
COVID-19 crisis for its partnership with BioNTech
BNTX to develop a coronavirus vaccine; as
of this writing, we're increasingly bullish that most
of the vaccines entering late-stage development
in the United States will meet Food and Drug
Administration guidelines for approval. Regardless
of the outcome, though, we think wide-moat
Pfizer boasts one of the largest economies of scale
in the pharmaceutical industry. "We expect
continued market share gains and new approvals
from existing drugs along with new pipeline
drugs will drive Pfizer's growth," director
of healthcare research Damien Conover says.

As the exclusive licensee of the trusted Blue Cross
Blue Shield brand in 14 states, Anthem boasts
the second-largest medical membership in the
United States. This position is impressive, given
the company's limited geographic reach
compared with other insurers, senior analyst Julie
Utterback says. In 2020, Anthem benefited from
less healthcare utilization due to COVID-19.
And although insurers face uncertainty around
shrinking employer-based insurance rolls
due to pandemic-related layoffs and possible
policy-related matters, we think the narrow-moat
company can manage those risks and thrive
over the long term.

Stats 09/30/2020

Stats 09/30/2020

Stats 09/30/2020

Economic Moat Rating

None

Economic Moat Rating

Wide

Economic Moat Rating

Narrow

Price

$219.24

Price

$36.70

Price

$268.59

Fair Value Estimate

$153.00

Fair Value Estimate

$42.50

Fair Value Estimate

$370.00

Morningstar Rating

QQ

Morningstar Rating

QQQQ

Morningstar Rating

QQQQ

Source: Morningstar Direct.

38

Source: Morningstar Direct.

Source: Morningstar Direct.



Morningstar - Q4 2020

Table of Contents for the Digital Edition of Morningstar - Q4 2020

Contents
Morningstar - Q4 2020 - CT1
Morningstar - Q4 2020 - CT2
Morningstar - Q4 2020 - Cover1
Morningstar - Q4 2020 - Cover2
Morningstar - Q4 2020 - 1
Morningstar - Q4 2020 - 2
Morningstar - Q4 2020 - Contents
Morningstar - Q4 2020 - 4
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Morningstar - Q4 2020 - Cover3
Morningstar - Q4 2020 - Cover4
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2021q2
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2021q1
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2020q4
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2020q3
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2020q2
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2020q1
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2019winter
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2019fall
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https://www.nxtbook.com/nxtbooks/morningstar/magazine_20150405
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20150203
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20151201
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20141011
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https://www.nxtbook.com/nxtbooks/morningstar/advisor_20141201
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https://www.nxtbook.com/nxtbooks/morningstar/advisor_20131201
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20121011
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20120809
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20120607
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20120405
https://www.nxtbook.com/nxtbooks/morningstar/investorconference2012
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20120203
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20121201
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20111011
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20110809
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20110607
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20110405
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20110203
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20111201
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20101011
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20100809_lincoln
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20100809
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20100607_lincoln
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20100607
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20100405_lincoln
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20100405
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20100203
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20101201
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20091011
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20090809
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20090607
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20090405
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20090203
https://www.nxtbook.com/nxtbooks/morningstar/advisor_2008fall
https://www.nxtbook.com/nxtbooks/morningstar/advisor_2008summer
https://www.nxtbook.com/nxtbooks/morningstar/advisor_2007spring
https://www.nxtbook.com/nxtbooks/morningstar/advisor_2007fall
https://www.nxtbook.com/nxtbooks/morningstar/advisor_2007summer
https://www.nxtbook.com/nxtbooks/morningstar/advisor_2008spring
https://www.nxtbook.com/nxtbooks/morningstar/advisor_2008catalog
https://www.nxtbook.com/nxtbooks/morningstar/advisor_2008winter
https://www.nxtbookmedia.com