ParfumGigi@aol.com

11.13.06, 1:15 PM ET

It might be a knee-jerk assumption to say that Democrats are bad for business, but a Standard & Poor's Equity Research analyst seems pretty certain that the outcome of the mid-term elections is downright detrimental for the pharmaceutical industry.

Not only will the federal government start negotiating directly with drugs companies about pricing, it will also push for cuts in advertising of newly launched drugs, according to S&P Equity Research analyst David Seemungal. Scrutiny by the Food & Drug Administration would also increase, as would the regulator's powers.

Currently, the pricing of drugs is an issue negotiated between insurance companies and drug manufacturers only. But Democrats could push for the government to haggle over the prices of Medicare Part D drugs directly with pharmas.

"While in the short term this may bring some pricing pressure on the drugs, it will be followed by higher sales volumes," wrote Seemungal in a research note. And, he added, that could mean lower operating margins.

Meanwhile Congress will probably now pay more attention to drugs marketing. A case in point is Senator Ted Kennedy (D-Mass), who's co-sponsored a bill to ban companies from advertising a drug until at least two years after getting FDA approval.

Pharmas who peddle popular drugs like PPIs, which treat stomach ulcers, would be most sorely hit, Seemungal said.

In the meantime, President Bush can wield his veto on any Democratic proposals, meaning that the worst case scenario is a forced concession to the Democrats, and some damaged margins.

"What is to stop the industry shifting further focus and sources to the emerging markets if the operating environment in the U.S. and Europe becomes too difficult?" Seemungal asks in the meantime.

With so many manufacturers already making an exodus to China and India, that seems a fair question.