Biopharma perspectives 2021-24 with Trump or Biden

The US elections may entail different scenarios for the biopharmaceutical industry. During his term, Trump has tried to eliminate “Obamacare” (a law that, among other things, makes it mandatory for companies to provide health insurance to their employees), and Biden has used that possibility as a main element of his campaign. But, at the same time as the President, local and state officials are also elected, and the House of Representatives and 1/3 of the Senate are renewed. It appears that Democrats will remain a majority in the House, but the Senate, now Republican, may go “blue.” 

Trump has appointed 3 members of the Supreme Court – for life -, making it (6/3) conservative. The obligation to have health insurance (and any subsequent reform) will be decided by the Supreme Court. The Democratic Party has pointed out that it could (if it obtains a majority in both chambers) change the number of people in the Supreme Court, limit the position to 18 years and make it “progressive”.

The US is 48% of the global pharmaceutical market, with an expenditure per person of 1,200 US $ per year, while its population is 4.25% of the world.

This is in large part due to the high prices of drugs and to the fact that health spending is 18% of the national GDP. As a consequence, US pharmaceutical companies have a net profitability of 13.7%, almost double the average profitability of the S&P500 companies (7.1%). Five of the top ten global pharmaceutical companies are American. 

Trump promised during his campaign and as a President to cut prices and end Obamacare, replacing it with “a much better program.” His achievement was the “tax amnesty” for the repatriation of benefits abroad, but he has not finished with Obamacare (there is an appeal to the obligation clause which is still pending at the Supreme Court) and he has not yet presented his alternative proposal.

On the other hand, the pandemic has changed almost everything. Health spending is skyrocketing and will soon reach the unsustainable 20% of GDP , but there are almost unlimited resources for COVID vaccines and treatments, and the FDA (drug registration and control agency) tries to speed up new product approvals . One of the lessons of the crisis has been the realization of the US dependence on the manufacture of products (raw materials and finished) from India and China, in addition to the absence of appropriate national security stocks of sanitary products.

Regardless of the result of the election, “near-shore” manufacturing, stockpiling in strategic national stocks, and regulatory flexibility seem irreversible. If Trump wins (and Republicans do not lose the Senate) Obamacare is likely to be reduced or replaced. If Biden wins, without a majority in the Senate, it does not seem that big changes can be expected, but if Democrats win the Senate they may move to a universalist system and negotiate prices for veterans, Medicare and Medicaid.

The health coverage of 50 million Americans who depend on Obamacare is at stake in this election. But whoever wins, the US will continue to be a great opportunity for American and foreign biopharma companies, due to the size, price and profitability of the market, the regulatory ease and the almost unlimited existence of financing for new companies and products in this highly profitable market, especially in an environment of a global pandemic and near negative interest rates.