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With the surprising outcome of last Tuesday’s election now sinking in, perhaps the biggest question for the pharma industry is, “What now?”  Under a President Clinton, who had publicly supported Obamacare and carefully delineated a roadmap for the future, the direction of pharma seemed a bit more certain even if we didn’t appreciate the movement toward Medicare negotiated prices.  While we, along with the rest of the country, don’t know exactly where President-elect Trump plans to take the pharma industry, we do have some idea given his party’s platform and hints he gave during his campaign.

Affordable Care Act

The ACA was one of the biggest issues Trump rallied against.  His website states, “Since March of 2010, the American people have had to suffer under the incredible economic burden of the Affordable Care Act...Obamacare has raised the economic uncertainty of every single person residing in this country.”  It’s clear that he plans to repeal and replace Obamacare, and sooner rather than later (as his plan for his first 100 days shows.)  According to Trump’s healthcare reform paper, “Our elected representatives must eliminate the individual mandate. No person should be required to buy insurance unless he or she wants to.”

Yet, despite his harsher rhetoric during the campaign, Trump’s position may be softening toward several key provisions of Obamacare.  Days after his election, Trump conceded that he likes the provisions forbidding insurances companies from denying coverage due to pre-existing conditions and allowing children to remain on parents’ policies for longer.  

In place of Obamacare, Trump may plan to allow insurances companies to compete across state lines, permit individuals to deduct health insurance premiums from their taxes, and promote the increased use of HSAs by making contributions tax-deductible and allowing holders to leave these funds to their next of kin without tax.  Trump has also argued for price transparency among healthcare providers. “Individuals should be able to shop to find the best prices for procedures, exams or any other medical-related procedure,” sites his website.  This may place more competition on local and regional plans consolidating more lives in large insurers.  In our opinion too much concentration in too few customers raises the stakes in Market Access Contracting and imperils pharma pricing.

Speaker of the House Paul Ryan’s healthcare plan, A Better Way, outlines the Republican plan for healthcare.  This includes ideas like tax credits for those without employer-offered coverage, allowing small businesses to band together for more purchasing power, and supporting wellness programs.  Ryan’s program also promises to accelerate drug discovery and improve the use of EHRs.  If Trump’s reform is able to achieve higher coverage rates, that will be a positive.  High deductible health plans will continue to be a challenge for companies with chronic condition therapies as patients may have a cash crunch early in the year that impacts their ability to pay for chronic therapies until their deductibles are met.

Drug Costs

To combat the rising price of prescription drugs Trump plans to lift restrictions on drug imports.  “Allowing consumers access to imported, safe and dependable drugs from overseas will bring more options to consumers,” says his website.  

We can also expect the new administration to push for increased transparency in setting drug prices, rebates, and copays.  “Policy makers also are looking for more disclosure of the role of pharmacy benefit managers (PBMs) in shaping prices and patient co-pays, as manufacturers and insurers both point fingers at these operations for failing to pass on savings from discounts to patients,” notes Jill Wechsler at PharmaExec.  We see danger for the future of copay programs from new policies.

Amid demands for the FDA to approve drugs faster, Trump’s plan could lead to more drug approvals and modernized review as FDA user fee programs are renegotiated. According to his plan, “There are over 4,000 drugs awaiting approval, and we especially want to speed the approval of life-saving medications.”  The potential to modernize the approval process could have positive implications for manufacturers in speed and lower costs.

Yet, Wechsler contends that despite Republican complaints about drug prices, “Sweeping changes are not likely in the near future. That will leave time for biopharmaceutical companies to build the case for continued investment in new important therapies, and for the adoption of value-based reimbursement models that better fit the broader shift to insurance and payment plans based on value and quality of care.”

Despite the relatively uncertain direction of a Trump administration, pharma stock prices soared following his election on the expectation that Trump and a Republican Congress would reduce government regulation on drug prices.

Value-Based Payments

Trump’s presidency may jeopardize the still-burgeoning value-based payment system.  As Fred Bazzoli notes, “Many value-based care initiatives came into being as a result of the ACA, so it’s unclear which, if any, of the nascent efforts to study new reimbursement mechanisms will survive any efforts to scale back the 6-year-old ACA.”  Others contend that Trump’s election won’t hamper value-based initiatives.  “It is entirely likely that leaders in the private sector will push forward with cost savings and innovative treatment,” says Jeff Smith, vice president of public policy at the American Medical Informatics Association via FierceHealthIT.  

The move to value-based care is likely too far along and too valuable to scrap altogether and MACRA legislation may not get wrapped in the “ACA repeal” movement.  However, early-stage and future value-based payment systems that rely on provisions in Obamacare may be endangered under a Trump administration.

Insurance Mergers

In July, the Justice Department announced its intent to block the mergers of Anthem and Cigna as well as Aetna and Humana.  “If allowed to proceed, these mergers would fundamentally reshape the health insurance industry. They would leave much of the multitrillion-dollar health insurance industry in the hands of three mammoth insurance companies, drastically constricting competition in a number of key markets that tens of millions of Americans rely on to receive health care,” said U.S. Attorney General Loretta Lynch.

However, with the election of Donald Trump, it’s unclear whether the Justice Department will do an about face and allow these two mergers.  His vow to allow insurance companies to do business across state lines may open the door for increased competition (and lower prices) but also makes it more likely that he will allow the market to shape mergers (and not the government).  

Proposition 61

With the defeat of Proposition 61 in California on election night, big pharma scored a win against price controls on drugs. According to Fortune, “The drug industry successfully swatted down California’s Proposition 61, a ballot initiative that would have capped how much the state’s public health programs pay for medicines at the same level the Department of Veterans Affairs (which receives deep discounts on treatments) shells out for them.”  The industry spent more than $100 million to fight the proposition, a formidable sum.

While the proposition itself would have affected a relatively small number of California residents, it would have set a precedent for limiting pharma’s pricing freedom.

Hospitals

While pharma stocks rose following Trump’s election, hospital stocks fell presumably because of Trump’s promise to repeal Obamacare (and possibly endanger health insurance for millions).  Some remain hopeful of the future for government-backed health care. “The ACA has added coverage for 20 million people. That's good. It's good for the 20 million people, and it's good for our industry. I don't think that's going to be easily undone, nor should it be," says Alan Miller, chief executive of Universal Health Services via The Philadelphia Inquirer.  But others worry that while Trump may have difficulty wrangling enough legislative support for repealing Obamacare, he may be able to undermine the program by defunding it.  Uncompensated care is a key drain on hospital budgets.  The potential impact on pharmacy budgets in hospitals may delay the adoption of new treatments.

Conclusion

While it’s not clear how President-elect Trump’s agenda will impact the pharma industry, it is clear that major changes are on the horizon.  We’re keeping our finger on the pulse of the government’s changing impact on the pharma industry and how that impact affects the bottom line for businesses that sell products and services to pharmaceutical companies.