Famous American entrepreneur and real estate developer, and now the President-elect, Donald Trump, is a topic of debate among everyone. The president of the Trump organization, and popularly known as a real estate mogul, he amassed an impressive $3.9 billion through his business empire.
Mr. Trump has been the epicenter of some of the most controversial debates. According to scholars and commentators, Trump’s beliefs are populist, protectionist, and nationalist. Contrary to uncertainty expressed over Mr. Trump’s policies, investors wondered whether the election of the 70-year-old Republican would be beneficial for free-market health care. The pharmaceutical companies are looking forward to get some answers from him during his tenure on:
– Shrinking profit margins
– Competition from generics
– Prohibitively high research and development costs, and
– Increased regulation and enforcement under the Affordable Care Act
For years, big U.S. drug makers have turned to acquisitions of foreign companies to put their overseas cash to work, rather than bring it home at a 35% tax rate. Trump has recently proposed to allow the repatriation of this stashed cash at a 10% tax rate, hoping some of it will be spent on hiring and investing in American businesses. Given Donald Trump’s plan to incentivize U.S. companies to bring back their stocked cash piles from abroad, it is widely evident that this move could trigger the much needed growth spurt in the pharmaceutical industry.
Nonetheless, pharmaceutical companies would not risk their money on new research and development, but instead they would invest their dollars on acquisitions. Corporate executives and dealmakers opine that through this move they could not only revive their drug development pipeline but also acquire smaller companies and grow their business.
According to data from the U.S. non-profit research and advocacy group, Citizens for Tax Justice, the five U.S. pharma majors holding nearly $250 billion of stashed cash piles overseas are Pfizer (PFE, -0.03%), Merck (MRK, -0.29%), Johnson & Johnson (JNJ, -0.24%), Amgen and Eli Lilly (LLY, -0.01%).
The European pharma market will not get affected much by his decisions. However, indirect effects could be seen depending on the upcoming US policies. The impact on European healthcare will also depend on their discretion to accept US policies seeing its obvious trade benefit. Given the President-elect’s protectionist instincts and well known resentment towards free trade agreements such as the Transatlantic Trade and Investment Partnership (TTIP) of EU, whose aim is to increase market access among signatories, the trade between US and Europe is in the firing line. But on the flip side, many EU member states are optimistic also. It is under speculation though that Trump’s suggestion on importing safe and dependable drugs from overseas would be a positive outlook to only low-priced economies or also on generic drugs made in some EU countries.
Although Trump plans to blow open the pharma industry’s firewalls, investors see the move as a defence against government action to rein in prices. Therefore, it is uncertain at this point if Trump’s move to bring more uniform pricing schemes could devastate profit margins. Given the thrust of both Democratic and Republican parties on affordable health care, India would be favored for safe, effective and affordable medicines to millions in the US. India contributes to nearly a third of all drugs sold in the US and this is unlikely to change for now. For Indian pharma, there may be minor impacts from Trump’s presidency like structural challenges faced by the companies in the US, which will continue. Also, alliance of drug distributors and retailers in the supply chain, and elevated competition would result in pricing pressure for Indian pharma companies active in the US.
In this new-new era of President-elect Trump, what is past is not prologue. We are expecting public support of more stringent drug pricing regimes moving closer to European nations’ constraints and value-based evaluations using health economics outcomes research.
We can thus infer that the Trump presidency will make an impact on the pharma sector for sure. However, the extent of impact is uncertain as of now. At the end its about the value being generated for patients and Trump’s policies benefiting patients as he speaks about lowering drug prices, greater price transparency, reducing import restrictions on foreign and generic drugs, and leveraging medicare. Americans eventually have to face the consequences of electing Trump. Only time will tell if he is a benefactor to the industry. It is time for the pharma sector to tighten their seat belts, as the final picture will materialize only after January 20, 2017, the day when the US’s 45th President will actually start putting things into action.