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Insurers Take Aim at Big Pharma. This Small-Cap Stock Stands to Win.

January 30, 2020 / James Brumley

The premise of generic drugs was simple enough. Branded medicines protected by a patent tend to be overpriced, but the equivalent therapy made by other companies once a patent expires should lead to price-lowering competition. As it turns out, however, generic drugs have become overpriced as well. That's the stance the state of California has taken, anyway, with Governor Gavin Newsom announcing early this month the state is planning to launch its own prescription drug label. The Blue Cross Blue Shield Association doubled down on the idea with a more eyebrow-raising announcement just a few days ago, investing $55 million in pharmaceutical company Civica Rx to help it create a new subsidiary that will offer the health insurer access to self-supplied, cheaper generics for the people it insures. If this is the shape of things to come -and it appears to be -- a small drugmaker called Catalent (NYSE:CTLT) is quietly positioned to benefit in a big way.