This post is part of a series in which TheStockAdvisors.com asked financial experts to name their top stock pick if McCain or if Obama wins the election.

"If Obama gets elected I expect him to pay great attention to domestic health care issues, in which case generic pharmaceutical companies should benefit; India-based Dr. Reddy's Laboratories (NYSE: RDY) will fare very well under such a scenario," says global stock specialist Yiannis Mostrous in The Silk Road Investor.

"The two main prospects for the company are its participation in the generic Allegra business, which could generate about $20 million in profits.

"As Dr. Reddy's has increased its U.S. pipeline filings to 60 Abbreviated New Drug Applications (ANDAs) pending approval, its U.S. business should be back on track soon.

"The second prospect is a potential merger and acquisition spree among the Indian pharmaceutical companies in an effort to face competition more effectively.

"A viable merger will allow companies to reduce research and development (R&D), as well as administrative costs, since there's an overlap when it comes to filing for the approval of similar products.

For big pharmaceutical companies, the largest business challenge is that patents are expiring on some of their most popular drugs. If they do not have new "blockbusters" to replace those, revenue is certain to fall. The solution is to raise prices on the best selling drugs and milk them before generics cut sales.

Unfortunately, while this may be a great deal for the companies, it is not so hot for patients and health-care costs. According to The Wall Street Journal [subscription required], "Pharmaceutical companies increased wholesale prices for the 50 top-selling branded drugs by an average of 7.82% in 2007." Prices on some drugs went up 50% or more.

Of course, the costs to produce these drugs is probably not rising much at all. What is obvious is that drug companies will probably face pressure from the government to keep prices down because the costs of health-care are still rising faster than GDP. The Congress may simply elect to put a cap on how much drug prices can rise. Or, the Feds may allow generics to come into the market sooner to provide alternative treatments that are cheaper.

But why should the government involve itself in an industry's pricing? The answer is that it is for the common good. That leaves out the companies themselves and their shareholders.

When the government interferes with the free market systems, it opens a Pandora's Box. Which industries will be regulated and which will not? Which affect the common good and which do not? Call it socialism, because that is what it is.

Douglas A. McIntyre is an editor at 247wallst.com.

Now that Merck & Co. (NYSE: MRK) and Schering-Plough Corp. (NYSE: SGP) both posted better-than-expected second quarter earnings, will investors show some love to big pharma?

Shares of Merck are down about 5% over the past three months while Schering-Plough has eeked out a mere 2.5% gain. Perhaps investors are worried about Merck's Vioxx legal battles, which so far it has largely won, and the controversy surrounding its cervical cancer vaccine Gardisal. Schering-Plough's $14.4 billion acquisition of Akzo Nobel's Oreganon unit may also be concerning some people. Maybe people think that if Pfizer Inc. (NYSE: PFE) is up the creek, all big drug companies are in the same boat.

Regardless, both companies posted impressive numbers that should quell the concerns of investors. Their stocks remain pretty cheap. Merck trades at a forward price-to-earnings multiple of 17, slightly cheaper than Schering-Plough's 20.

Merck, based in Whitehouse Station, New Jersey, reported net income of $1.65 billion or 77 cents, up from $1.5 billion, or 69 cents a year earlier. Revenue jumped 5.9% to $6.1 billion fueled by demand for blockbusters such as the high-cholestoral treatment Vytorin which it makes in a joint venture with Schering Ploug. Excluding some costs, Merck earned 82 cents, beating the 72 cent-average estimate of analysts surveyed by Thomson Financial. The revenue figure also beat the $5.77 billion, analysts had expected.

Vytorin also boosted results at Kenilworth, NJ-based Schering Plough. Net income climbed to $539 million, or 34 cents a share, more than doubling from $259 million, or 16 cents. Revenue jumped 14% to $3.2 billion. Excluding some costs, profit was 41 cents, beating the conesensus forecasts of 35 cents. Revenue also beat expectations of $3.07 billion.

Drug manufacturer Eli Lilly & Co. (NYSE: LLY) has got serious problems that go beyond its lackluster first quarter earnings.

During the first quarter.profit fell 39%, despite the fact that revenues rose 14%.. In spite of the fall-off in profits, management has raised full-year sales projections, and expects earnings of $2.63-$2.73 for the year. But that's only part of the story.

Eli Lilly recently yanked its European application to sell Arxxant, a drug to reduce diabetes-related eye diseases. Scaling back additional European operations incurred charges of $0.08 per share. Lilly still faces more than 1,000 lawsuits related to use of its antipsychotic drug Zyprexa. The legal bill for this drug has already surpassed the $1 billion mark. The end is not yet in sight as Lilly continues to sell the drug in selected markets.

Additional worrisome news is that Lilly does not have a robust drug pipeline. There aren't many drugs in advanced stages of the approval process. Its next big drug to market might be prasugrel, useful in treating heart disease. This drug is only in preliminary trials.

Lilly figures if it cannot produce its own drugs, it can acquire them from others. Lilly bought Icos Corporation in 1Q 2007 for $2.3 billion, $0.29 per share in charges. It is too soon to tell whether this acquisition was a bargain or an additional liability.

In what may be a snapshot of modern American society, two of Eli Lilly's top selling drugs are Cymbalta, used to treat anxiety disorder, and Cialis, used to treat erectile dysfunction. Sales of the anti-depressant Cymbalta rose 89% to $441.8 million. Sales of Cialis were up 19% to $265.8 million for the quarter.

Pfizer Inc. (NYSE:PFE) CEO Jeffrey Kindler reportedly may cut several thousand jobs as he overhauls the drugmaker which investors have pilloried for failing to have a robust enough pipeline.

Kindler, a lawyer who has never sat on a corporate board, wants to keep research and development spending flat while slashing other spending in areas such as marketing and manufacturing, according to the Wall Street Journal (subscription required), which first reported the plans.

"Despite his relative inexperience in the corner office, Mr. Kindler has won high marks from the board for his boldness, speed of action and frequent communication with directors, says someone familiar with the situation," the Journal says. "He has come across as likeable and accessible with Wall Street, and has pacified critics of the company's transparency by putting its drug pipeline online."

Kindler is expected to offer details of his plans on Monday. Pfizer shares nosedived last month after the company ended the development for a drug that was expected to replace its blockbuster Lipitor, which is responsible for one-quarter of its annual revenue and almost half of its net income. Lipitor faces competition from generic drugs as soon as 2010.

Pfizer and rival Merck & Co. (NYSE:MRK) may be looking to buy biotech firms to add new experimental drugs as the patents for their existing patents expire, according to Bloomberg News.