For only the second time in American history, the incoming presidential administration is not a new one. Does that mean that the American public and industry can look back to get an idea of what’s ahead?
Perhaps.
Although as far as it relates to the medtech industry, when Grover Cleveland took office for his second nonconsecutive term in 1893 the most advanced medical device was the stethoscope.
Regardless, medical device manufacturers today might be hopeful Donald Trump picks up where he left off. In his first term, President Trump pushed the Food and Drug Administration to get innovative devices and diagnostics to market more quickly.
In 2017, under then-commissioner Scott Gottlieb, the FDA released its Digital Health Innovation Action Plan, which looked to encourage innovation of digital health technology by reshaping agency policies and processes for bringing products to market, such as software-based devices. The plan included issuing new guidance on digital health, developing new regulatory approaches to the technology, and building digital health expertise within the agency.
Another Trump policy that benefitted industry was the Right to Try Act in 2018, which allows patients with terminal diseases to try experimental devices and treatments after other approved methods have failed.
Industry also welcomed the repeal of the Medical Device Tax in 2019. Signed into law in 2010, the 2.3% tax, which was imposed on an array of domestically produced as well as imported devices, served as a mechanism to fund the Affordable Care Act (ACA), or Obamacare.
“To ensure they can retain appropriate margins, medtech companies with Chinese suppliers may need to pass off any increased tariff costs to customers or shift the sourcing closer to home.”
Danny Schmidt and Amanda Laskey
If the second Trump administration continues with business-friendly policies from the first, it could extend tax cuts or introduce incentives for R&D investment, thereby benefiting medtech innovation.
Specific to the ACA, there were numerous attempts to repeal what was President Barack Obama’s signature legislation. Although they failed, those efforts created anxiety as its repeal would create uncertainty in the health care market, especially with any changes to Medicaid. During the campaign, Trump was ambiguous about his health care plans, including whether he intends to go after the ACA again.
But while whether Trump remains committed to scrapping the ACA remains unclear, subsidies passed under the Biden administration, which slashed premiums for many ACA recipients and boosted enrollment, expire in 2025 and would need the next Congress to extend them.
It’s no secret that Speaker of the House Mike Johnson is no friend of the ACA and has stated that significant changes, if not total repeal, could be in the ACA’s future.
However, since it became law in 2010, Obamacare has not only become more embedded in the health care landscape but more popular among the American people as well. Some 45 million Americans are covered by the ACA, so repealing it would be tricky.
And of course, there was the COVID-19 pandemic and Trump’s handling — or mishandling, depending upon one’s point of view — that stood out the most during the first Trump term. The pandemic highlighted the nation’s woefully dependent need on foreign manufacturers for essential medical supplies, such as ventilators, testing kits, and personal protective equipment, or PPE.
Trump enacted the Defense Production Act — a wartime measure used to ramp up domestic production of goods deemed essential for national security — to address these shortages and turned to emergency-use authorizations (EUAs) to speed up access to the latest medical advancements.
President Biden has utilized both as well.
Also favorable to industry during the first Trump term was Operation Warp Speed (OWS), a public-private partnership between the US government and vaccine makers to accelerate COVID-19 vaccines and treatments. While this collaboration did not strip away vaccine development safety protocols, it did lower some bureaucratic barriers allowing the public to have access to the vaccine in record time and was widely viewed as a success.
Tariffs
But of all the policies during his first term that might provide stakeholders with clues for his second, the most significant may be imposing tariffs on China and threatening to do so again.
In March 2018, Trump slapped $50bn in tariffs on imported goods from China, citing theft of US intellectual property as the main reason. Specifically, the policy placed a 25% tariff on imported steel and 10% on aluminum, both of which are used in various medical devices.
Although the increased costs of these materials were burdensome for device makers, they also encouraged domestic production. New and increased tariffs in a second term could further spur domestic manufacturing, but they could also impose challenges for industry.
In a recent blog post, Danny Schmidt and Amanda Laskey, senior health care analysts with global consulting firm RSM, say the prospect of higher tariffs is already weighing heavily on medtech executives.
As they note, more than half of the suppliers for the ten largest medtech companies are outside of the US, with 8% of those suppliers located in China. Only 44% are located domestically.
The tariff issue becomes even more significant for US publicly traded health systems, with only 51% of those facilities located in the US and 18% of the remaining 49% in China.
“To ensure they can retain appropriate margins, medtech companies with Chinese suppliers may need to pass off any increased tariff costs to customers or shift the sourcing closer to home,” Schmidt and Laskey write.
They also argue new tariffs could make it difficult for health systems to negotiate fixed annual reimbursement rates with government and commercial payers.
Fixed payments, Schmidt and Lakey point out, limit the ability for a health system to pass on increased costs to consumers. Supply expenses, they add, account for 13% of total health care costs.
Moreover, citing the US Census Bureau, they note that the US imported $224bn in medical equipment and pharmaceutical preparations through September 2024, a 16% increase from the same period in 2023.
Not So New
But with all the attention — and controversy — surrounding Trump’s pledge to hit China with more tariffs, the policy isn’t all that new. In June, the Biden administration imposed its own round of tariffs on China to the tune of $18bn.
Then, Schmidt and Laskey told Medtech Insight that Biden’s tariffs marked a “major shift” in US policy toward strengthening supply chains and ensuring Americans have reliable and secure access to medical products, especially during an emergency.
Most notably, Biden’s tariffs were most severe on Chinese syringes, increasing their prices by as much as 50%. Chinese syringes have been the subject of several FDA safety alerts and in March 2024 the agency said the safety issues with these devices were “more widespread than previously known.”
Though fueled by the pandemic, the momentum behind this shift in US policy has been building for some time, according to Schmidt and Laskey. They note that the political climate in Washington has grown increasingly favorable to a more protectionist trade posture, especially toward China.
Shortages of masks, gowns and testing kits in the early stages of the pandemic forced lawmakers on both sides of the aisle to focus on the domestic production of essential goods, as the lack of them proved to be a matter of life and death.
But while “made in the USA” might stoke patriotic fervor, it comes with a price tag for manufacturers, such as having to move operations from overseas to the US. In addition to the financial cost, moving production also requires restructuring supply chains and coordinating with vendors and distributors.
But as Laskey pointed out, Biden tariffs were limited and not applied to all Chinese goods. So how impactful a second round of Trump tariffs will be on the medtech sector will depend on how broadly and deeply they are applied.
Tariffs could also mean less profits for medtech companies, forcing them to invest less capital in research and development and possibly stifling innovation.
However, that could be offset by business-friendly tax policies, such as further tax cuts, which, as they were in the first Trump term, are likely to be part of his second.
But then again, there is always the possibility of China retaliating with its own tariffs and an escalating trade war, which most analysts say is in neither country’s interest.
BIOSECURE Act II
Another variable that could drastically change how medtech firms do business in China is the BIOSECURE Act, which Congress did not attach to the National Defense Authorization Act passed earlier this month — despite the bill passing overwhelmingly in the House.
If enacted, the legislation would prohibit pharmaceutical and biotech firms from using services or equipment from Chinese companies considered a national security risk.
Even though the bill has bipartisan support, it also has its detractors, chief among them Sen. Rand Paul, R-KY, who has said he worries the legislation could give a leg up to certain companies over others.
Still, Schmidt and Laskey say the legislation is likely to pass and despite its seven-year phase-out period would have “a significant impact” on the supply chains of many businesses in the health care and life sciences industries.
“For medical innovation to thrive, it is essential that the public policy environment support innovation throughout the medtech ecosystem.”
Scott Whitaker
The bottom line is that how Trump’s second tenure in The Oval Office will impact the medtech sector remains to be seen.
In a statement after the presidential election, AdvaMed CEO and president Scott Whitaker referred to medtech as the “backbone” of the US health care system and added that the sector is transforming patient care.
“But in order for medical innovation to thrive, it is essential that the public policy environment support innovation throughout the medtech ecosystem,” Whitaker said. “We look forward to working with the Trump administration and the new Congress to ensure that the regulatory and policy environments keep pace with these advances and the patients who need them.”
So as the former president returns to power for only the second time in US history, his supporters can look to his first term and feel confident that a second Trump term will bring strengthened domestic production, pro-business policies, and increased investment in the US.
On the flip side, his detractors can point to the first Trump term and feel anxious there will be more chaos from protectionism, increased costs, and limited global competition.
Regardless, medtech stakeholders would be wise to brace for a bumpy flight while hoping for a smooth one.
“Additional tariffs could impose higher costs for exposed companies,” Schmidt and Laskey write. “As costs rise rapidly and tariff uncertainties loom, health care and life sciences organizations should look to adopt advanced supply chain intelligence tools to mitigate potential supply cost challenges.”
