The election of Republican Donald Trump as the next president of the US could suggest a smoother road ahead for pharmaceutical manufacturers on drug pricing policy and mergers and acquisitions. But an administration friendlier to pharma is not a guarantee and Trump’s bombastic rhetoric and disruptive leadership style will add a high degree of uncertainty for industry in Washington DC.
Key Takeaways
- The change in administration and Republicans gaining control of the Senate raises concerns for industry, such as drug pricing policy, M&A oversight, the Biosecure Act and Trump’s threats to levy steep tariffs on imports.
- Leadership at the FDA and HHS also may be a concern, but changes at the FTC could be welcomed as potentially more friendly to mergers and acquisitions.
- The last Trump administration targeted drug pricing, but another uncertainty is the fate of Medicare price negotiations under the IRA.
Drug manufacturers have several important issues that will be impacted by a change in administration and a Republican-controlled Senate, including drug pricing policies, M&A oversight, the fate of the Biosecure Act and potentially steep tariffs on imports, which could include active pharmaceutical ingredients (APIs).
Trump beat Vice President Kamala Harris, who campaigned on the passage of the Inflation Reduction Act (IRA) and lower drug prices as achievements working with president Joe Biden, in the 5 November US election.
The IRA opened the door for a new Medicare drug price negotiation program, which had a limited impact on drug manufacturers initially, but could pose far-reaching consequences long-term. Industry lobbied aggressively against the Medicare negotiation program and continues to fight the program in court.
Drug Pricing Still On The Docket
Given the expected outlook of a Harris administration on pharma policy and fears of IRA expansion, industry and investors may welcome the uncertainty of a Trump administration. Republicans also will lead the US Senate and typically are friendlier to drug manufacturers than Democrats. Control of the House of Representatives had not been decided at press time.
More Post-Election Coverage
Drug pricing wasn’t as much of a centerpiece of Trump’s campaign in his third presidential campaign, where the focus was on the economy and immigration. However, pharma already has experience with Trump and the relationship was not always rosy.
When Trump was president from 2017-2021, drug prices were a policy priority. Among the many ideas the administration considered were rebate reform and calculating Medicare drug reimbursement based on an index of lower prices paid by European countries, Japan and Canada. Industry scorned the proposal known as the “most favored nation” approach.
How Trump will address drug pricing or the changes to the Medicare drug negotiation program remains unclear, but the topic could remain a hot button issue for pharma.
“While this election has been to an extent, settled, it still is rife with some uncertainties,” EY Americas Life Sciences Sector Leader Arda Ural said in an interview with Pink Sheet sister publication Scrip.
Along with drug pricing policies, an economic issue that could have implications for pharma is Trump’s plan to implement wide-reaching tariffs on imports. He has proposed tariffs of 10%-20% on imports generally, but tariffs of 60% or more on imports from China, where many active pharmaceutical ingredients are produced.
“Combine that effect with the Biosecure Act, the effect of regionalization will be compounded,” Ural said. “Where do you bring in your API or semi-finished product?”
The Biosecure Act would prohibit federal contracts with certain Chinese companies, including contract manufacturers. Smaller and mid-sized pharma companies, in particular, have been concerned about the proposal, which has been on hold on Capitol Hill, but enjoys bipartisan support.
Clearing The Way For M&A
In a positive development for pharma, Republican control of the White House could signal a friendlier stance on M&A. Under the Biden administration and Federal Trade Commission Chair Linda Kahn, the commission took a tough stance on the subject.
The agency made two notable actions to block pharma deals that struck a chord with industry, including the Amgen/Horizon deal on the grounds of Amgen’s former rebating practices, as well as the Sanofi/Maze deal citing portfolio overlap even though the transaction was a relatively small in-licensing deal and Maze’s Pompe disease candidate was in early development. Amgen’s acquisition of Horizon was ultimately cleared after the firm filed a lawsuit against the FTC, but Sanofi walked away from the Maze deal.
The uncertainty around the FTC’s thinking on M&A contributed to a tense environment for pharma deals, something the industry relies on to refuel pipelines and drive investment.
“A Republican-led FTC head would likely be more flexible with respect to M&A oversight,” Leerink analyst David Risinger said in a same-day research note. “We anticipate FTC changes, which could facilitate greater biopharma consolidation.”
Investors appreciate consistency, but a big uncertainty hanging over a Trump presidency is agency leadership. US Food and Drug Commissioner Robert Califf has been an experienced and steady leader under Biden, and Health and Human Services (HHS) Secretary Xavier Becerra was previously attorney general of California and a 12-term congressman.
“I hope that the mechanisms put in place that [are] working really well will not be disrupted as a result of new assignments that would be what I would call unconventional assignments,” Ural said.
Trump, who emphasizes deregulation across federal agencies, has suggested the possibility of appointing Robert F. Kennedy Jr. as head of HHS. Kennedy has floated vaccine conspiracy theories, which could be worrying for the science-based agency.
“We need to see who Trump advances into key power positions,” Risinger said. “Nominations for HHS Secretary and FDA Commissioner will be important perception drivers ahead. We will need to see if there is disruption to FDA’s ability to execute and retain staff.”
