What impact will Biden's withdrawal from the presidential election have on the pharmaceutical industry?

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On local time July 21, 2024, U.S. President Joe Biden posted an open letter on his personal social media, stating that for the best interests of the Democratic Party and the country, he has decided to withdraw from the election and support Harris's nomination as the Democratic presidential candidate.

A single stone has caused a thousand waves, and various media have different opinions on this event. So, what impact and variables will Biden's withdrawal have on the pharmaceutical field?

01

The U.S. Version of "National Medical Insurance Negotiations"

Firstly, it will undoubtedly be the U.S. version of "national medical insurance negotiations."

Because the United States practices free pricing, the law stipulates that the government is not allowed to negotiate directly with pharmaceutical companies. Even government medical insurance needs to negotiate with pharmaceutical companies through third-party pharmacy benefit managers (PBMs).

However, due to the acquisition of PBM organizations by large commercial health insurance companies, they have sufficient motivation to collude with pharmaceutical companies to raise drug prices, which is why drug prices in the United States are significantly higher than in other countries.

For example, the first domestically developed anti-cancer innovative drug from our country to enter the U.S. market, Zebuting, has a price in the U.S. that is nine times that in China; and Junshi's PD-1, Toripalimab, is approximately 33 times higher than the price after medical insurance in China.

Thanks to autonomous pricing, the United States has become one of the world's largest pharmaceutical markets. At the same time, high drug prices also mean huge medical expenditures for the U.S. government.

When Biden took office, it was during the outbreak of the COVID-19 pandemic, and the U.S. national economy faced a shock. The Biden administration announced the "American Rescue Plan Act," with a total amount of the rescue plan reaching 1.9 trillion, which included actions to curb U.S. drug prices.

That is, if the price of a drug rises more than inflation, the pharmaceutical company must refund the federal medical assistance program.

In 2022, Biden signed the "Inflation Reduction Act of 2022" (IRA Act), once again "cutting" U.S. drug prices.

The IRA Act requires the U.S. federal government to negotiate prices for the most expensive single-source high-priced drugs used to ensure the medical expenses of Americans over the age of 65 through Medicare.

In August 2023, the Centers for Medicare and Medicaid Services (CMS) announced the first list of 10 drugs for medical insurance price negotiations.

It can be imagined that in the face of this negotiation, the pharmaceutical industry has sparked a strong wave of opposition. Major multinational corporations not only took the lead in forming an "anti-antitrust" alliance (PULSE), but also united to file a lawsuit against the federal government.

The Biden administration took a tough stance, adopting a series of strong measures such as imposing high taxes and heavy fines to promote the implementation of reforms.

In the end, in October 2023, all pharmaceutical companies on the first list of the U.S. national negotiations "voluntarily" agreed to participate in the 2026 U.S. medical insurance price negotiations.

Now that Biden has announced his withdrawal from the U.S. presidential election, whether the 2026 U.S. medical insurance negotiations can be implemented and what variables they will bring is uncertain.

Prior to this (on June 27, 2024), Biden and former U.S. President Trump held their first debate for the 2024 presidential election in Atlanta, Georgia.

Biden also emphasized his efforts to reduce drug prices during his tenure, especially reducing the price of insulin to $35 per month. Trump accused the Biden administration of trying to cut social security and medical insurance, claiming that he would ensure the stability of these key programs.

Assuming Trump can ultimately defeat the new Democratic presidential candidate Harris and return to the White House, will he take action on the "U.S. medical insurance national negotiations" that are halfway through?

It should be noted that during Biden's tenure, he abolished the immigration medical insurance regulations established by Trump in 2019.

02

Biological Security Sanctions

Secondly, there is the direction and impact of the United States' biological security policy towards China.

In May 2024, the U.S. "Biological Security Act" was passed by the House Oversight and Accountability Committee with a 40:1 vote.

The act, citing national security as the reason, requires the U.S. government to impose sanctions on Chinese innovative pharmaceutical companies such as WuXi AppTec and BGI Group.

This unreasonable act is a "stigmatization" of our country's "14th Five-Year Plan," aimed at curbing the benign development of leading enterprises in China's biopharmaceutical field.

In fact, as early as 2022, Biden signed an executive order to launch the "National Biotechnology and Biomanufacturing Initiative," pledging an investment of 2 billion U.S. dollars to develop the U.S. biomanufacturing industry.

Prior to this, there were foreign media reports that after the "Chip Act," Biden was preparing to sign an executive order related to biotechnology, with the target reportedly "to reduce dependence on China."

Therefore, during Biden's tenure, he has been constantly trying to interfere with the development of China's biotechnology field.

In contrast, Trump has shown less attention to the field of biotechnology compared to Biden.

In 2016, GEN (Genetic Engineering & Biotechnology News) conducted a survey of 2,300 members from the global biotechnology industry and academia to understand their attitudes towards Trump.

The results showed that 47.7% of the respondents believed that Trump might not support funding for the National Institutes of Health (NIH), and only 25.52% of the respondents believed that Trump's election as president would have a positive impact.

As expected, after Trump took office, he repeatedly obstructed public institution research affairs, including cutting biomedical research budgets, while hoping to invest more funds in fields such as AI and quantum information science.

However, in the face of the outbreak of the COVID-19 pandemic, the Trump administration's own biological security governance capabilities were questioned by the world. Such as taking unilateral measures, competing for allies' epidemic prevention resources; weakening global biological security governance mechanisms, and withdrawing from the World Health Organization.

After a series of outrageous operations, can Trump learn the "lesson"?

If not, and if he can overturn the Biden administration's "National Biotechnology and Biomanufacturing Initiative," it would be good news for China's biotechnology field.

If so, and if he deeply realizes that the foundation for successfully preventing and responding to biological events is to have advanced biotechnology and strong and complete industrial production capabilities, the situation may become more severe.

The Trump administration may pursue the path of "America First, unilateralism," and other characteristics to seek U.S. biological security, and the "decoupling risk" will further increase.

To this day, the field of biological security has undoubtedly become a new topic of geopolitical and great power game.

Whether it is the "Bidenomics" promoted by the Democratic Party or the "America First" advocated by the Republican Party, whether it is Trump or Harris, whoever is elected as the President of the United States, the United States may make difficulties for China in the fields of biological security and biotechnology.

03

Conclusion

Over the past five years, Sino-American bilateral pharmaceutical trade has grown from accounting for 0.6% of the trade relationship to nearly 3% of the total value. This growth is not due to a simple domestic substitution relationship, but rather a friendly exchange in the field of biomedicine between the two countries.

For example, China has provided the United States with more efficient supply chain capabilities and a high-quality engineering talent dividend, helping it to address the problem of drug shortages. Meanwhile, major American multinational corporations (MNCs) export cutting-edge biotechnologies, such as small nucleic acids and gene therapy, to China, promoting the development of China's biopharmaceutical industry.

At the same time, reasonable mergers and acquisitions between domestic innovative pharmaceutical companies and overseas MNCs are also promoting the rapid development of biotechnology in both countries, and the vast market size of China is undoubtedly a "gold mine" for many MNCs.

Therefore, only by ending unreasonable sanctions and opening up cooperation is the future, and it is the only way to achieve a win-win situation.

【Editor’s Note】This is quick translation of a Chinese article published on DrugTimes. To read the original article, please click here. All comments are highly welcome. Many thanks!