Now what for the Life Sciences industry?

In the aftermath of an (in many ways) unprecedented campaign season that felt way too long, and with the pundits and pollsters off air, it is important to assess implications of potential policies of the new administration on the life sciences industry in a congress dominated by a Republican majority.

One thing is certain: this set of predications is not a crisp black and white picture and is expected to shape up as Trump’s campaign statements improve from seven paragraphs into comprehensive bills over the next several years.

Here is a short and speculative list of what life sciences companies should brace for.

Drug Pricing: While a Republican Administration and Congress would historically not legislate any capitation to, transparency of or negotiation around the drug prices, statements were made from the Trump campaign about the affordability of drugs which at times overlapped with Bernie Sanders’ rhetoric. Specifically, empowering the Medicare to negotiate drug prices with the manufacturers has been a hot issue all along for both campaigns. However, these statements were not codified in a Trump Campaign healthcare position as directly as it was in Clinton’s. Additionally, considering the failure of Proposition 61, seeking pricing transparency in California, I don’t expect drug pricing to be a primary target for this administration to regulate and project that any future bills to limit the ability of pricing drugs to be unlikely.

Affordable Care Act (ACA): Trump campaign has made repealing ACA a clear and imminent target all along. The conventional wisdom states that in absence of 60 votes in the senate it cannot be totally repealed though there will be sections that can be immediately clawed back. The ACA’s implication for the industry has been neutral to positive which can be summed as ‘dilutive growth’ that balanced the addition of 20 million uncovered lives to the healthcare system yet at a lower average price point. If the law would be repealed in its entirety without finding a replacement coverage of this population, the industry should expect a top-line erosion from the vanishing utilization of medications by these individuals. I don’t expect the provision in the law allowing children to be covered in the insurance policies of their parent’s until the age of 26 to be repealed.

Regulation: Less regulation has been a common theme our clients have been asking for and they are likely to get it in the next four years. FDA has performed well in its ability to review and approve new medications and devices on a timely fashion within the confines of PDUFA. So, it is conducive not to expect a faster review time from the FDA unless a major restructuring is done how it operates. No expectation of the Sunshine Act to be pulled back, either.

Parallel Importation: This is a tricky one as the last of Trump’s seven policy statement calls out for “removal barriers to entry into free markets for drug providers that offer safe, reliable and cheaper products”. It states that “the pharmaceutical industry is in the private sector, drug companies provide a public service. Allowing consumers access to imported, safe and dependable drugs from overseas will bring more options to consumers”. It will be critical to observe, if this policy position stays as stated or will disappear over time as the industry will weigh in as it did in the past several attempts. We anticipate the latter.

Tax Outlook:  This is going to be a very active area to watch. First, we expect that the medical device excise tax of 2.3%, so fiercely fought off by the industry and embargoed until December 31, 2017 no longer be a looming threat. Secondly, proposed lowering of the corporate tax rate will help fuel the net income leading up to bigger cash reserves, dividends and/or stock buybacks, all helping the industry and its investors with better capitalization. Finally, a so-much talked about one-time repatriation tax on offshore profits can be a very likely policy expectation to take effect in the next 2-3 years.

M&A Activity: The industry has enjoyed a high level of portfolio optimization activity since the beginning of 2014. With the added infusion of cash trapped overseas, as well as the ongoing and pressing need to acquire external innovation, life sciences companies’ M&A firepower might sustain through 2017 and beyond.

In summary, these predictions are anything but certain and given the recent abysmal performance of the pollsters, anyone coming up with predictions should be humbled. However, these areas should be closely watched with optionalities as contingency plans.