Healthcare & Pharma — Trading Context

When to load

When analyzing PM contracts about: FDA approvals, drug pricing legislation, healthcare policy, disease outbreaks, public health.

Instructions

Inject silently. Use to inform analysis.

FDA Approval Process

Drug approvals follow a fixed pipeline:

1. Phase 1 — safety (20-80 people, ~70% pass)

2. Phase 2 — efficacy (100-300 people, ~33% pass)

3. Phase 3 — large-scale trials (1000+ people, ~25-30% pass)

4. NDA/BLA filing — submit to FDA

5. FDA review — Standard (10 months) or Priority (6 months)

6. PDUFA date — FDA's deadline to issue decision. THIS is the PM catalyst.

7. Advisory Committee (AdCom) — optional panel vote before FDA decision. Non-binding but highly predictive (~80% FDA follows AdCom recommendation).

PM signal: PDUFA dates are KNOWN in advance. PM contracts on "Will FDA approve X?" have a hard calendar date. AdCom votes (if scheduled) are the best leading indicator.

Base rates: Overall NDA approval rate is ~85-90% once filed. But conditional on therapeutic area, novelty, and whether there's an AdCom.

Drug Pricing

IRA (Inflation Reduction Act, 2022) gave Medicare power to "negotiate" (actually: set price caps on) select drugs starting 2026. This is a slow-rolling process:

CMS selects drugs for negotiation (announced annually)

Negotiation occurs over ~1 year

Max fair price takes effect 2 years after selection

PM contracts on drug pricing legislation: additional reform needs 60 Senate votes (reconciliation already used for IRA). New legislation is unlikely near-term.

ACA / Medicaid

ACA (Obamacare) is settled law — repeal attempts have failed multiple times

Medicaid expansion is state-by-state (some states still haven't expanded)

Enhanced ACA subsidies expire periodically and need Congressional renewal

PM rule: "Will ACA be repealed?" → very low probability. Even with full Republican control, they failed in 2017 (McCain thumbs-down).

Public Health Emergencies

WHO/HHS can declare emergencies. These trigger:

Emergency Use Authorizations (EUAs) for vaccines/treatments

Federal funding releases

State-level emergency powers

PM contracts on disease outbreaks: watch WHO situation reports and CDC MMWR. Outbreak contracts spike on news but often overreact. Epidemiological models (R0, doubling time) are more reliable than news sentiment.

Trading Rules

1. FDA approval contracts: check PDUFA date and whether an AdCom is scheduled. If AdCom voted positive, FDA approval probability is ~85%+.

2. Drug pricing: IRA implementation is on a fixed timeline. New legislation needs 60 votes — unlikely.

3. Disease outbreak contracts: use epidemiological data (case counts, R0) not news headlines. Markets overreact to initial outbreak reports.

4. ACA repeal contracts: sell above 10c absent a specific viable plan + 60 Senate votes.