Trump vs. Harris: What Does it Mean for Biopharma?
As the 2024 U.S. election between Donald Trump and Kamala Harris approaches, the biopharma industry is keenly watching how each candidate's policies could shape the future of the sector.
Although the Inflation Reduction Act (IRA) has already set the stage for significant changes in drug regulations, neither candidate is expected to completely overhaul the current regulatory framework due to the IRA and a divided Congress, but their differing approaches could lead to important shifts in the industry.
Kamala Harris: Expanding the IRA and Public Health Initiatives
For the Democrats, Kamala Harris is expected to continue and expand upon President Biden's healthcare reforms, and especially the IRA, particularly given that Harris' vote helped pass the IRA. Under her leadership, Medicare could potentially negotiate up to 50 drug prices annually, exerting more pressure on companies heavily reliant on Medicare pricing.
Many companies are likely to feel the brunt of these policies due to their exposure to Medicare - additionally, Harris’ focus on expanding pricing controls into commercial markets and implementing out-of-pocket caps for generic drugs could further compress profit margins across the sector, resulting in reduced profitability for pharmaceutical companies.
Despite this, Harris' policies could also benefit certain areas within biopharma. She has shown a strong focus on mental health, women’s health, and oncology, which could offer opportunities for some companies, whilst companies specializing in orphan drugs for rare diseases are likely to be protected from IRA price negotiations.
Donald Trump: Deregulation and Business-Friendly Policies
On the Republican side, Donald Trump is expected to take a more business-friendly approach. Although the IRA would remain in place under a new Trump administration, he is likely to adopt a stance that will ease implementation and reduce regulatory pressures for some companies, thus providing some relief for firms that have been struggling with the added costs and complexities of Medicare negotiations.
Trump’s deregulatory stance may also favor M&As, with Republicans generally more supportive of industry consolidation and may take a less stringent approach to oversight by the U.S. Federal Trade Commission (FTC), potentially leading to increased M&A activity. This could spur growth and innovation, especially among smaller biotech firms looking for larger partners or investors.
However, his policies on immigration, which may impose restrictions, could limit the flow of global talent into the biopharma industry, potentially stifling innovation in the long term.
Looking Ahead: What Does the Election Mean for Biopharma?
Ultimately, the outcome for the biopharma industry will be dependent on the reaction of investors and financial markets, and investors remain cautious - waiting for the election outcome before making significant moves.
The Nasdaq Biotech Index (NBI) has seen modest growth, but high interest rates continue to pressure the sector. A Trump victory is predicted to be slightly more favorable for investors due to the expected deregulation and tax incentives, whereas a Harris administration could increase focus on healthcare equity and innovation through government support.
Ultimately, both candidates’ policies could significantly impact drug pricing, regulatory reforms, and innovation in the biopharma industry. As the race unfolds, companies and investors will need to carefully assess how either administration could shape the future of healthcare in the U.S. in 2025 and beyond.
