As Donald Trump assembles his new government, speculations about the consequences of his second presidential term abound. For the life sciences industry, the US president-elect’s more business-friendly stances could entail the repeal of the much-debated Inflation Reduction Act (IRA) while the naming of vaccine sceptic Robert F. Kennedy Jr as secretary of health and human services may have some serious consequences. We look at the possible outcomes for pharma.

 

IRA Repeal?

One conceivable result of Trump’s second presidency, and of the new Republican majority in Congress and the House of Representatives, could be the revocation of the Biden administration’s IRA, under which the US government has the ability to negotiate the prices of the drugs in its Medicare healthcare programme for over 65s.

Fiercely criticised by pharma innovators as a curb to innovation, the IRA has attempted to bring down exorbitant drug prices, something Trump also took aim at during his first term through the “Most Favored Nation” drug pricing policy. Although his campaign issued a statement that this policy would not be brought back, it remains unclear what Trump’s stand will be on drug pricing and on the IRA.

Innovators, as represented by the Pharmaceutical Research and Manufacturers of America (PhRMA) appear hopeful of a new relationship with the in-coming government. “We are committed to working with the Trump administration and the new Congress to make our healthcare system work better for patients while preserving our unique ecosystem that enables greater innovation and lower costs for patients,” said CEO Stephen Ubl. For PhRMA, the real problem behind US drug prices is the role of middlemen, or pharmacy benefit managers (PBM), which the organisation is pushing to reform.

Amgen CEO Robert A. Bradway at the recent FT Live Global Pharma and Biotech Summit claimed that “The issues [for innovative pharma] extend beyond this election,” he said. “We need more innovation, not less as the population ages.”

One pharma company that seems particularly unworried about the prospects of a second Trump run is AstraZeneca, having announced a USD 2 billion manufacturing expansion in the country just after the election. “The US economy is expected to grow and there’s lots of innovation there. We want to be present in this country and be a big contributor to investment in research and development,” said chief executive Pascal Soriot.

 

The Kennedy Factor

Another factor that is sure to affect US healthcare and life sciences is the naming of renowned public health agency sceptic and anti-vaxxer, Robert F Kennedy as secretary of health and human services. What exactly the appointment means in practical terms is yet to be seen, but as the head of an agency that holds sway over everything from drug, vaccine and food safety to medical research, Medicare and Medicaid, Kennedy will have tremendous influence.

Kennedy has vowed to “make America healthy again,” something GSK CEO Emma Walmsley recently pointed out, “is not such a bad thing when 30 percent of Americans are living with two comorbidities.” But while Walmsley remains confident that “science will prevail” over unfounded beliefs, especially around vaccination, Kennedy’s appointment has alarmed many.

Having made false claims that stand to build distrust around vaccines such as “there’s no vaccine that is safe and effective” and that vaccines cause autism, which has been proven untruthful, Kennedy may bring dangerous momentum to vaccine distrust in a country where, due to misinformation, measles cases are already on the rise.

“We need to have somebody who is going to be grounded by science and evidence and not somebody who rejects it,” said John Maraganore, a former chief executive of the biotech Alnylam.

“I don’t want to go backwards and see children or adults suffer or lose their lives to remind us that vaccines work, and so I am concerned,” said Mandy Cohen, director of the US Centers for Disease Control and Prevention.

“Our healthcare system is far from perfect. But it has spurred so much progress that has benefitted the American people. This appointment, if confirmed, puts all of that at risk,” claimed Ashish K. Jha, former White House COVID-19 response coordinator and dean of Brown University’s School of Public Health.

Upon news of Kennedy’s designation, vaccine makers’ stocks, including Pfizer, GSK and Moderna fell by as much as 8 percent. “RFK has said he has no plans to ‘take away vaccines’ but the point is around sentiment, stance, and perspective — that impacts investors’ view of how FDA and other HHS issues will evolve,” said Jefferies analyst Michael Yee.

Kennedy has also insisted on rehauling the FDA, recently claiming that the “FDA’s war on public health is about to end. If you work for the FDA and are part of this corrupt system, I have two messages for you: 1. Preserve your records, and 2. Pack your bags.”

“The FDA and NIH fall under HHS, but there is little precedent in recent history for HHS policy dictating or affecting FDA regulation or approval of drugs,” opined BMO Capital Markets analyst Evan Seigerman.

Stoic FDA Commissioner Robert Califf commented: “It’s pretty clear that the gist of this administration … is to change a lot of things, and how it gets changed depends on who gets appointed into key positions and how the various policies play out.”

 

Supply Chains and Imports

Another area where Trump’s second presidency stands to have an impact is on trade. The president-elect has often taken a stand on US manufacturing, saying that he is looking to build its capacity and discourage imports through tariffs. President Biden has already made moves to discourage foreign dependence, particularly from China, with legislation such as the Biosecure Act. But Trump has gone further, proposing tariffs of 10-20 percent on imports, and 60 percent or more on those coming from China, where a large part of the country’s active pharmaceutical ingredients (APIs) are sourced.

Existing tariffs are already putting pressure on companies that rely on China for their supply. “The tariffs have exacerbated existing supply chain vulnerabilities in the US biotech sector, especially for companies heavily reliant on Chinese APIs,” affirmed Sarah Thompson, US Biotech Association.

Producing these ingredients in the US has proven to be prohibitive for most. “While there is an increasing push for domestic sourcing, the immediate transition is proving costly.” Some believe that Trump’s return to the White House could be beneficial for Indian pharma, with the trend to move supply chains away from China. “We are seeing a growing interest in diversifying suppliers, with firms looking towards India and Southeast Asia as potential alternatives,” Thompson maintained.

 

M&A Friendliness

With Trump in power, another potential outcome looks probable: a more M&A friendly environment. Under Biden, the Federal Trade Commission’s (FTC) chair Linda M. Kahn had a tough attitude towards dealmaking leading notorious FTC oppositions. Under her leadership, Illumina’s acquisition of cancer blood test developer GRAIL was opposed and Amgen’s deal for Horizon Therapeutics was confronted with objections and delays until it finally went through.

For some, a change in FTC leadership under Trump could usher in an era of renewed encouragement for business deals. ““FTC changes should lead to a more favourable M&A environment,” said analyst Michael J. Yee.

“A Republican-led FTC head would likely be more flexible with respect to M&A oversight,” Leerink analyst David Risinger agreed. “We anticipate FTC changes, which could facilitate greater biopharma consolidation.”