During the campaign, President-elect Trump talked about several key issues that would impact the biopharmaceutical sector, including drug importation, tax reform and Medicare negotiated drug pricing. Analyzing his messages and considering the Republican majority in both the House and the Senate, I believe the Trump administration is likely to have a positive impact on the biopharmaceutical industry in four key areas:
Despite campaign rhetoric, it is unlikely that President-elect Trump will move toward permitting the import of cheaper pharmaceuticals from countries like Canada and Mexico to the US. The topic comes up frequently in political campaigns but there are few practical implications. Additionally, Medicare negotiated drug pricing is also highly unlikely to happen as Republicans are generally not interested in this course of action – negotiations would ultimately save little to no money given the Federal government’s limited ability to negotiate prices with drug companies.
Republicans are likely to pursue corporate tax reform that could include provisions allowing the drug industry to repatriate their profits at 8-10% versus 35%¹ and then pay taxes on normalized basis for foreign earnings. This should be favorable to the industry as they could use the money domestically to pay dividends, buy domestic companies and complete stock buybacks.
So far, President-elect Trump has chosen Representative Tom Price to lead Health and Human Services (HHS) and Seema Verna as administrator for the Centers for Medicare and Medicaid Services (CMS). These selections appear to reflect consistency, as historically Republicans in these roles have tended to support quick approval for new drugs (both generics and branded) as a way to stimulate competition and offer choices to patients. His selection for Food and Drug Administration (FDA) leadership will also be worth watching.
Independent Payment Advisory Board (IPAB) actions
President Obama plans to put this board in place before the end of his administration to help pilot initiatives related to controlling drug costs that are administered by physicians. The initial goal of this board is to reduce prices charged by physicians for infused medications. Although the immediate impact of this action would likely be small, the main concern of pharmaceutical companies is that this would eventually become an avenue towards government controlled drug pricing. However, IPAB is a part of the Affordable Care Act (ACA), and would be eliminated if the ACA is repealed, which was a key tenet of the Trump campaign.
¹ Source: Washington Analysis, report dated November 9, 2016.
This blog post is provided for informational purposes only and should not be construed as investment advice. Any opinions or forecasts contained herein reflect the subjective judgments and assumptions of the authors only and do not necessarily reflect the views of Loomis, Sayles & Company, L.P. This information is subject to change at any time without notice.