Election 2016: Did pharma win or lose?

November 14, 2016

Author: Matt Arnold, Principal Analyst

Does he govern as a populist or as a generic Republican?

That’s the question pharma policy hands must be asking themselves after an election in which both candidates beat up on pharma for its pricing practices.

The prize has gone to a decidedly non-traditional candidate of the traditional party of business. Donald Trump ran against Wall Street. He ran against Big Business. He ran against Big Pharma, promising price controls and reimportation. But he leads a party that has long been broadly deferential to them. Will he talk like Huey Long and govern like Herbert Hoover, deferring, in turn, to the party pros who have a plan? Or will he really “Drain the swamp,” as his voters hope?

Obamacare in the crosshairs

One thing is certain: Trump will gut the Affordable Care Act.

Err, probably.

Okay, so I wrote that bit before President-Elect Trump came out of a meeting with President Obama to announce his intention to preserve parts of the ACA – namely, a prohibition on insurers denying people coverage because of preexisting conditions and one allowing adults up to 26 years old to remain on their parents’ insurance. But given that Trump is said to believe whatever the last person he’s talked to has told him, and given that you can’t save those parts of the law – the parts people like – without the parts they don’t like (insurance mandate, narrow network individual marketplace plans), and given that he and every GOP leader have spent the past eight years promising to kill the whole thing, I’m putting my money on killing the whole thing.

Doing so six years into its laborious implementation will be enormously disruptive to the healthcare industries. Should he go the path of least resistance and govern as a standard Republican president, Trump might preserve the parts of the law designed to serve as scaffolding for a new system of delivery that rewards value over volume of services performed and pills dispensed. In a “partial repeal” scenario, Republicans could defund the insurance provisions of the law but leave other parts intact.

But given the symbolic importance of Obamacare, they probably won’t stop short of the promised full repeal, in which case the reorientation of American medicine from quantity to quality will probably be stopped dead in its tracks and the ACO model of healthcare delivery is finished, or at least badly hobbled and left to the market to advance.

But why stop with the ACA?

And these may be the least disruptive changes to our healthcare system. Medicaid? Block granted, most likely. Medicare? House Speaker Paul Ryan has already said he hopes to privatize it as part of the GOP’s healthcare reform-reform work.

Here, will Trump be a populist or a party-line guy? He owes his election in large part to economically insecure older whites in the Rust Belt. He promised them he’d protect the entitlements they depend on. Will he stand up to Ryan and his House compatriots, potentially moving the party away from the anti-entitlements orthodoxy by which it has governed, to varying degrees, since Reagan? Or will he grab that third rail with both hands and rip up a popular program that has stood as the central organizing principle of American healthcare economics and delivery for a half-century?   

Wall Street sees a winner (hint: it’s not patients)

Either way, the pharma industry will take a hit as volume of scripts sinks, due to millions losing insurance coverage. Wall Street seems to be betting it can make up the difference – and then some – through increased prices – which will be, ironically, less constrained post-repeal. Financial analysts are also excited by the prospect of nixing the law’s Branded Prescription Drug Fee, which was set to spike to $4 billion next year. And pharmas are expected to benefit from Trump’s one-time 10% offshore revenue repatriation tax plan. Perhaps most importantly, the Trump camp has hinted it will seek to speed more drugs to market through a lighter touch on approvals.

What does this mean for patients? A lot of them (say, 22 million) will lose coverage and be unable to access medical care, much less medications. The challenge of meeting these Americans’ medical needs will fall on a healthcare industry undergoing chaotic change.  

 

“Interested in hearing more expert analysis on the healthcare implications of the outcome of the 2016 U.S. election? Register for our live webinar, taking place on Thursday, January 19, 2017 at 10 a.m. EST, and receive a complimentary ebook with key take-aways.”

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