This weekly column offers opinions on the latest pharmaceutical industry news.
The holidays came early for the pharmaceutical industry this year.
With Donald Trump elected to the White House and Republicans controlling Congress, the companies that make your medicines can expect a friendlier environment in which to operate. And investors quickly responded by boosting drug and biotech stocks.
So what lies ahead? Here are a few predictions:
FDA will stand for Faster Drug Approvals
Many Republicans would like to speed the Food and Drug Administration process for getting new medicines to patients. That’s going to remain a high priority.
All one has to do is look at the health care page on Trump’s transition website, which late last week made clear that change is in the offing with this one sentence: “Reform the Food and Drug Administration, to put greater focus on the need of patients for new and innovative medical products.”
“This is a key issue,” said Ramsey Baghdadi, cofounder of Prevision Policy, a health care consulting firm.
How the Republicans will accomplish this goal is uncertain. The House has passed a bill to speed approvals, among many other things, but a similar effort in the Senate has stalled while Congress waits for the new administration’s priorities. Any push to accelerate FDA review would delight patient groups, investors, and, of course, drug makers.
Meanwhile, expect pressure on the FDA to issue rules allowing drugs to be marketed for unapproved uses. Drug makers have long complained that their free speech rights are being limited and believe court rulings are on their side. In fact, there was a two-day meeting at the FDA last week where companies and consumers sounded off.
And plan on having a new FDA commissioner. Dr. Robert Califf may be seen as sympathetic to the pharmaceutical industry, but he is an Obama appointee.
Drug makers will have more leeway on pricing
A big bet now is that the Trump administration will not be as aggressive in tackling prescription drug prices as a Clinton administration might have been.
With Republicans in control of both chambers, it seems unlikely that legislation would pass allowing Medicare to negotiate drug prices or Americans to import medicines to save money. The same thing goes for any bill that would require drug makers to justify pricing or disclose costs.
Even so, the issue isn’t going to disappear. A recent Kaiser Family Foundation poll found that 63 percent of Americans want the government to take action to lower drug costs. Some state legislators are making noise about reviving or introducing bills to reduce prices.
For a president with a populist base — and a seemingly populist streak — the public anger may be hard to ignore. Moreover, Trump can be a wild card. He did sound off, albeit briefly, about prescription drug prices during the campaign. And he’s yet to issue any policy proposals.
“He’s against price controls and surrounded himself with pro-industry advisers, but he may not be against allowing Medicare to negotiate,” said Brook Baker, a professor at Northeastern University School of Law and a senior policy analyst for Health GAP, a group that advocates for wider access to medicines. “But it’s hard to know. He may not do anything.”
Friendly tax policies are on the way
Another key piece of the Trump plan is tax reform. Again, the Trump team is short on details, but one plan floating around is to allow companies to repatriate money parked overseas and pay taxes of only 10 percent or less, instead of 35 percent.
This could be a holiday, of sorts, for drug makers.
“There’s no doubt that part of the tax reform plan is to bring that money back here,” said Ira Loss of Washington Analysis, who tracks the industry. “The industry will be thrilled because there are huge amounts of money overseas.”
Evercore ISI analyst John Scotti estimates that nine big drug and biotech companies have a combined $120 billion in overseas cash. The list includes Merck, Pfizer (PFE), Bristol-Myers Squibb, Celgene (CELG), Gilead Sciences (GILD), Amgen (AMGN), Eli Lilly, Biogen (BIIB), and AbbVie (ABBV).
The companies could use that money for any number of things, such as funding mergers and acquisitions, which can be a preferred growth strategy rather than investing more in research and development. They could also buy back shares or boost dividends, moves that warm the hearts of investors.
Of course, these are the proverbial early days, and all expectations — including mine — are subject to change. Remember that Trump is a political novice — who is also prone to changing his mind more often than some toddlers.
Nonetheless, the pharmaceutical industry is poised to make some notable gains with his election. And that’s something few would have predicted just a week ago.