BioPharm Executive: Election 2016: It Does Not Look Good for Biotech

Election 2016: It Does Not Look Good For Biotech
April 27, 2016
By Karl Thiel for

Now that the nominees for the major political parties are all but settled, it's tradition that we take a look at how the life sciences would fare under each potential president. Usually that's a matter of going through policy statements and white papers, peppered with some of the candidates' verbal record and, to the extent its relevant, their political history.

Of course, Donald Trump's candidacy pretty much throws that out the window. I really do make a point to be as neutral and non-partisan as possible in these assessments, but it's simply impossible to deal with Hillary Clinton and Donald Trump symmetrically. That's not about Republican vs. Democrat, or conservative vs. liberal, or any other typical marker of political beliefs. It's about Trump's sui generis brand of incoherent nativism, bigotry and shifting expressions of self-interest, which largely don't align with any particular political philosophy. To the extent that he's said anything coherent about healthcare policy at all, I doubt it has much bearing on anything he'd actually do, given the chance. More importantly, if he ever gets his hands on our nuclear codes, his positions on healthcare will be the least of our problems.

Nevertheless, I'll take a stab at it.

What Trump Might Do, Maybe, Unless He Doesn't

Regarding healthcare in the most general sense, we mostly know that Trump would repeal Obamacare and "replace it with something terrific." His website has a 7-point plan that is presumably meant to be that terrific something, but it only offers up some vaguely outlined ideas for keeping what's popular about Obamacare (no denials for preexisting conditions!), ditching what's not (no mandatory coverage or subsidies!) and ignoring the fact that this would make the entire system unworkable. (Trump also used to support a single-payer healthcare system, but says he no longer does).

Other than that, he's said few specific things about healthcare. He did indicate at some Town Halls and at the March 10 Republican Primary debate that he would let Medicare negotiate directly with drug companies on drug prices—which, if true, is something he agrees with Hillary Clinton on.

But since parsing out Trump's policy positions is like interpreting dialectical slam poetry, let me step further back. Here's the interpretation of Trump, as I best understand it, held by most people who support him and have some kind of grip on political and economic realities (i.e. they're not merely motivated by anger or racial animus): Trump is a businessman who will support business-friendly policies, and that will be good for economy. Trump doesn't mean the more outrageous things he says, and advisors will guide him through the vast expanse of political and policy turf of which he has no understanding. Under his leadership and the more specific direction of his advisors, we'll move in a new direction that isn't beholden to special interests or the palsied orthodoxies of the two major parties.

This interpretation—a generous distillation of what I've heard from the conservative pundits who have voiced support for him—seems like magical thinking. It does, however, have the benefit of making Trump the perfect candidate: he'll only do the things you want him to do, not the things he says he'll do! So if we grant all this, there are indeed some aspects of Trump's plan that might appeal widely to business. His proposal to lower the corporate tax rate to 15 percent is, in a vacuum, actually likely to win a lot of fans in the business world. After all, 15 percent is a number that, say, Pfizer could probably live with. But of course, this number doesn't come in a vacuum; it's part of a ludicrous tax proposal that would skyrocket our debt. (The right-leaning Tax Foundation has it raising the deficit by $10 trillion over 10 years. Most estimates run much higher).

Perhaps Trump's most consistent position is his antipathy towards large trade deals, so we can probably count on him looking to impose tariffs on imported goods, particularly those from Mexico and China. An analysis from Moody's suggests that this alone will pretty much instantly plunge us into deep recession. However, the pharma industry can, at least for its own part, breathe a small sigh of relief. Many innovative drugs come from the U.S., and even those that don't would likely not be subject to any tariffs. In terms of the inevitable retaliation from other countries, most will be loathe to make prescription drugs more unaffordable for their citizens.

But wait, it gets weirder! It's true that Trump wants to limit the entry of foreign goods into the U.S....except pharmaceuticals! He supports re-importation of prescription drugs as a way to lower prices—another area in which he agrees with Hillary Clinton.

Then There's Hillary

Hillary Clinton actually has a political record, and a lot more policy specifics. Which means there's a lot more for the industry to specifically dislike. Her aggressive stance on drug price control, while hardly a surprise, certainly isn't making insiders or investors happy. And her proposal to shorten the exclusivity window from 12 years to 7 years under the biosimilar pathway already has the industry howling with rage and fear.

Her frankly bizarre plan to meddle in the R&D budgets of life sciences companies is exactly the kind of big government tinkering that conservatives lambast. As I've often said before, the industry can blame itself to a large extent for this, since it spent decades overplaying the direct connection between drug prices and R&D spending. But it will likely be smaller companies that pay disproportionately for her plan if it comes to pass. It is at the smaller end of the industry, after all, where business models are wildly diverse, very innovative and do not need one-size-fits-all management from the government.

For all that, however, Clinton is very much a known quantity with a lot of experience working with the pharmaceutical industry (a point that can be used both for and against her). Perhaps that's why, at least as of March, she had received about as much in campaign contributions from Big Pharma as all other candidates combined. At that point, she had gotten about $600,000 from industry. Trump had gotten just north of zero.

Nevertheless, at this point in the race it's pretty clear why biotech and pharma stocks have been taking it on the chin. There might be a great contrarian play here, but you'll be biting your nails until at least November—if not longer.

-Karl Thiel

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