US Drugmakers Look to Trump for Help
Based on positions he took during the election campaign, the US pharmaceutical and biotech sectors stand to benefit from a Donald Trump presidency, some analysts have suggested. In expectation of changes in rules that a number of companies have found confining, share prices in both market segments initially surged immediately after the vote.
Some financial advisers have waxed enthusiastic about signs they see as boding well for the drugs sector. Passages from Trump’s Contract with the American Voter web presentation, which outlines plans for his first 100 days, assert that he wants to speed up the approval of “life-saving medications” by the Food and Drug Administration (FDA). More than 4,000 generics are said to be on the list.
Since the election, some Republican politicians also have hinted that the new administration would make use of the party’s dominating presence in Congress to increase federal aid to R&D, with the National Institutes of Health, for example, receiving substantially more funding. Trump has also pledged to repeal the 2.3% tax on medical devices, which was suspended in 2016 but was due to be reinstated in 2018.
The pharmaceutical industry was encouraged by the 53:46 defeat of a ballot measure in California, which sought to set limits on drug prices. Drugmakers are said to have “aggressively” lobbied against the legislation that was backed by the AIDS Healthcare Foundation, the American Association of Retired Persons (AARP) and Senator Bernie Sanders. The California Drug Price Relief Act would have allowed state healthcare agencies to buy prescription medicines at the price paid by the Department of Veterans Affairs, which according to reports is 24% below that paid by other government agencies.
Some of the biggest benefits the pharmaceuticals sector hope to receive from a Trump presidency include changes in tax laws that would allow multinational companies to “repatriate” earnings from foreign subsidiaries tax free. This, they say, could stimulate M&A, with the bigger companies having more cash to buy small biotech firms that specialize, for example, in rare diseases or cancer.
Despite a few highly visible transactions, analysts quote data published by Thomson Reuters showing that overall deal-making in the drugs sector has fallen back 65% so far in 2016 against 2015. Large dealmakers hope also that a Trump administration will loosen the reins on tax inversions, in which a US company buys a foreign company and moves headquarters to a location such as Ireland, where corporate taxes are lower.
The jury appears to be still out on what repercussions the new president’s plans to repeal the Affordable Care Act (ACA, known popularly as Obamacare), would have. One pharmaceutical analyst told the journal MarketWatch that repealing the act would have massive repercussions, affecting “virtually every sub-sector of the medical market” – especially if 20 million people lost their health insurance.
Comments on what changes a new Republican administration might bring for drug pricing were guarded. While during the campaign, Trump, too, hinted that he would seek to rein in “excessive” price increases, many pharmaceutical players believe a Republican administration would be less stringent than a Democratic one. On allowing drug reimports, however, the businessman is completely at odds with drugmakers.
Repercussions for the FDA as yet are unquantifiable, analysts and industry players alike agree. Steven Grossman, deputy executive director of the Alliance for a Stronger FDA, told the US medical journal Focus he hoped those who would defang or dismantle the regulatory agency will realize that it regulates a lot of consumer spending, and the consumer industries produce a lot of high-paying jobs. “We hope they see that this agency is in the interest of the economy, and that disrupting the FDA is not a way to boost the economy,” he said.
Ron Cohen, president and CEO of Acorda Therapeutics and chairman of industry group BIO, told Focus that the fundamental challenges the industry has been grappling with will not change, no matter who is in the White House, adding: “We still need to ensure incentives for the massive, at risk investments required to create innovative, more effective medicines, while still ensuring that everyone who needs a medicine has access to it.”