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Drugs, defense industries may be in for more scrutiny

WASHINGTON - The new masters of the House, the Democrats, are promoting an economic agenda that would put more money in the pockets of ordinary citizens and government, while leading to greater oversight of big business.

California Rep. Nancy Pelosi, who is in line to become speaker, has promised to fight early on in the next Congress to lower the price of prescription drugs available through Medicare. Efforts to curb military spending also are likely, political and financial analysts said, following an election whose outcome was influenced in large part by voters' dissatisfaction with the handling of the war in Iraq.

But with the two parties stalemated in the Senate, where it usually takes 60 votes to pass major legislation, the pharmaceutical and defense industries could find themselves beset more by unwelcome rhetoric in Congress than any hurtful changes in law.

To be sure, few major changes in corporate America are expected to result from Democrat-led initiatives during the next two years - with the exception of a proposed increase in the minimum wage that might get substantial Republican support.

In the long term

The long-term outlook for companies in the biotechnology and homeland security businesses could benefit, analysts said, from anticipated Democratic efforts to promote stem-cell research and inspect more cargo containers at ports. And the alternative energy sector could also get a boost.

But heightened scrutiny of other sectors, ranging from drugs to defense to hedge funds, could darken their prospects on Wall Street.

"The drug industry is on the top of the list of industries that would be uncomfortable if Democrats are successful in the elections," said Ira Loss, an analyst at Washington Analysis.

That's because Pelosi has promised legislation that would allow the government to negotiate directly with drug companies to purchase medicines for Medicare, a process the drug industry equates to price controls.

With many political analysts viewing the Democrats' win of the House as evidence of waning support for the war in Iraq, some investors are bracing for the possibility that military spending could gradually slow.

Shares of Lockheed Martin Corp. dropped $1.04 to end at $86.45 on the NYSE, where defense contractor Raytheon Co. declined by 72 cents to $48.96.

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