When investors hear that a company will lower prices on its products, their instinctive reaction is to expect a sequential decline in margins and profits, which is not entirely incorrect. However, sometimes these price decreases end up attracting new business, expanding market share, and more than making up for the lost ticket price in the top-line revenue.
With increased volume and demand, suppliers also receive better deals, which significantly lower costs, among other benefits. Ultimately, a price discount can end up being a blessing in disguise. As President Trump just announced his proposal to lower drug prices among the most prominent players in the space, this is precisely what healthcare investors are hoping for.
