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Make US Pharma Great Again!?

“And the other thing we have to do is create new bidding procedures for the drug industry, because they’re getting away with murder.” – Donald Trump

Since the surprise election of Donald Trump, many industries and individual companies have been on the receiving end of his comments during speeches, interviews, and tweets. At his January 11, 2017 news conference, one industry, in particular, was the target of his wrath: US pharma. The quote at the start of this article, taken from a much larger tirade against the drug industry, is typical of President Trump’s recent comments against the pharma industry. Pharmaceutical and biotech stock indices, as well as stock prices of specific companies with high-priced portfolios of specialty medicines, dropped 2 to 4 percent after the news conference, on top of other previous comments made immediately after the election lamenting high drug prices (1),(2),(3).

Drug pricing, while important, is just one potential impact of the Trump presidency. His policies on areas such as regulation, taxes, international trade, and Affordable Care Act (ACA) reform could also have significant effects. This two-part series will address the following questions:

  • Why has a Trump presidency targeted the biopharma industry?
  • How could a Trump presidency affect the US biopharma industry through specific policy actions?
  • What, if anything, can individual companies do to prepare themselves against these policy actions?
  • What if any role is there for the use of commercial analytics in assisting companies to mitigate the increased risk and uncertainty caused by these policy actions?

The first two questions will be tackled in this article.

Why target pharma?

Presidential candidate Hillary Clinton and leading contender Bernie Sanders were also no fans of the pharma industry – Clinton even commented in a Democratic town hall debate that drug companies were on her most-proud enemies list, along with the National Rifle Association, health insurance companies, the Iranians, and Republicans (4). Clinton, however, received vastly more campaign contributions from drug companies relative to all rivals, including Trump, and provided high-priced speeches (though she never disclosed the transcripts of those speeches) to industry representatives (5). She represented “the devil you know” and was also more aligned with the pharma industry on international trade (the majority of growth in the global pharmaceutical market is happening outside of developed markets) (6), and was more likely to engage her adversaries in transparent and predictable ways.

A key factor complicating predictions of President Trump’s effect on the drug industry is that he is not ideological, but driven by pragmatism, something Obama noted after their first face-to-face meeting at The White House (7). Also, some positions that he may wish to execute could draw opposition from his own party, particularly when it comes to drug price controls, direct federal government negotiations on drug prices, and restraints on international trade. That said, the traditional alliance that has historically prevented price controls in the US had already been showing signs of weakening before the election. The election of Trump will provide greater impetus to policy change on this issue. Trump may even find allies on some issues with Democrats, especially with progressive voters who were supporters of Bernie Sanders. Common to Trump and Sanders voters are people who feel that the political and economic systems no longer work for them.

The pharma industry is a particularly attractive target for the populist Trump to attack for a variety of reasons:

  • It is perceived as an industry headed by a few dominant global firms (even though actual market concentration metrics point to an industry that is very diffuse in market power) reaping excessive profits at the hands of those who need but cannot afford high-priced medicines.
  • The industry touches everyone through the medicines people take – it is a demon everyone knows.
  • There are higher cash out-of-pocket outlays for drugs relative to hospital and physician care, even though the first two comprise a far greater percentage of 2015 national health care expenditures (hospital spending 32.3 percent, professional services 26.2 percent, prescription drugs 10.1 percent (8)). Drug costs, however, are more visible to people.
  • The complexity of the pharma industry makes it ripe for people to fear – it is a natural reaction to something they don’t understand. Even industry insiders have a hard time explaining in simple language how, for example, drug pricing is done or the high costs and risk/uncertainties of the R&D process.
  • Elderly patients on fixed incomes, representing the highest-voting participation rate population segment, are especially dependent on medicines and feel the economic hardships when drug prices rise.
  • Actions by bad industry actors, such as illegal sales and marketing practices, and price gouging of old generic drugs, fuel populist anger at the industry. Despite a variety of medical advances from the industry that benefit society, low Gallup polling data taken over time on the industry reflects this anger (9).
  • The news media and medical journal establishment are all too willing to engage in what one author has called “pharmaphobia” in demonizing the industry (10).
The uncertain ride

In the sidebars below, I have tried to predict (based on content from his website) the policies that President Trump may take on a wide variety of issues and then extended these to the areas that could impact the overall business performance of the US pharma industry. Some policy actions are predicted to have a positive impact on pharma (see sidebar below), such as intellectual property protection and tax/financial reforms, whereas others, such as policies on drug pricing, labor immigration and international trade, are likely to be more negative (see sidebar below).Each sidebar is not meant to be a comprehensive list, but rather a prediction of key areas that have a possibility of occurring. Empirical analysis is needed to understand the magnitude of potential policy action effects.

Trump’s victory highlights the growing trend of populism, which has been seen in other countries in different forms. The common themes are public reactions to growing economic inequality, people who have been marginalized in society and resistant to social change, and attacks on well-entrenched political, economic, or cultural institutions that many people see as no longer working for them (11). Based on this thesis (and similar explanations) of the factors causing the rise of Trump’s brand of populism, the pharmaceutical industry is especially ripe for ridicule and attack. The pharma industry is well-connected in the political system and seen as one of the most powerful lobbying groups in the halls of government. The industry is also seen as an economically powerful sector and pharma companies are placed in the difficult position of arguing that for-profit enterprises require the current price structure to stay in business. Companies would not stay in business very long if they supplied medicines for free (or nominally priced) to all those who could not pay for them. Currently, the pharma industry is losing the optics battle, even if real world evidence is on its side.

My concern is that the pharma industry is in for an even more uncertain ride than it was expecting before the election of President Trump. It would be wise for industry executives not to dismiss the significance and implications of his victory. The long list of not only defeated Republican and Democratic presidential candidates, but also the repudiation of political, economic, social, and media elites, are testimony to the dangers of underestimating this populist movement. For the pharma industry, a clear rethinking is needed of the commercial model. As has been stated in a previous article, there is the growing gap between the rising cost of pharmaceutical R&D to bring drug innovation to the market and individual/societal willingness and ability to pay for this innovation (12).

The next article in this two-part series will look at what pharma companies can do to mitigate the increased risks and uncertainties brought about by a Trump presidency, as well as analytics to help redefine a commercial model design.

George A Chressanthis is Principal Scientist at Axtria. This article has been co-published with Axtria:

Potential Positive Impacts on Overall Industry Performance

Intellectual Property Protection

Strengthen intellectual property (IP) protection in developing countries.

Many developed markets like the US, Japan, and some European countries have strong IP protections. However, China, India, Canada, and other nations have far weaker regulations. Weak IP protections mean less innovation, which in turn decreases patient access to new medicines and reduces health/economic outcomes (13)(14).

Tax and Financial Reforms

Reduce the US corporate income tax rate to be in line with or lower than major OECD trading countries

The proposed lowering of the tax rate from 35 percent to 15 percent would significantly decrease the financial incentives for merger and acquisition activities driven by tax inversion/transfer pricing effects (as studied in a prior white paper (15)), repatriate profits held in oversea subsidiaries for reinvestment in the US for R&D, and use for productive acquisitions and/or payouts to shareholders (16).

Enact a deemed repatriation of corporate profits held offshore at a one-time tax rate of 10 percent

Coupled with a significant reduction in the corporate income tax rate, this added inducement will further repatriate overseas profits for reinvestment in the US and will benefit a number of pharma companies.

Maintain the corporate tax expenditure for the R&D credit (neutral impact)

While many changes are expected on corporate tax policy, such as the elimination of virtually all tax expenditures, the tax credit for R&D investment is proposed to be maintained. This added financial incentive is important for the research-intensive pharma industry.

Eliminate the virtually unique US practice of citizen or resident-based taxation on global personal income

US citizens or resident aliens pay taxes on global income, regardless of whether they are living in the US or abroad. The US practice of citizens or residential-based taxation is virtually unique from the norm of territorial-based taxation, where only income from a source country is taxed by that country. Such a change would make it easier for companies with US citizens or residents who work for biopharmaceutical multinationals to operate in foreign subsidiary units.


Reduce federal regulations, which are seen as impediments to business

Some regulations will be reviewed in order to expedite the approval of both innovator drugs and generics. This could have a mixed positive and negative impact.

Clarity on review of business operations outside the US

Clarity on data integrity, compliance with cGMPs for overseas operations, self-monitoring quality and manufacturing processes, and advancing mutual reliance agreements for GMP inspections with authorities in Europe and elsewhere should help companies.

Crackdown on quality control of business operations in China and India for drugs utilized in the US

President Trump intends to make it more difficult for businesses to produce drugs outside of the US, such as in China and India, for domestic consumption. If the policy intent is to enhance quality controls for drug manufacturing operations, then that’s a good thing. If, however, the policy intent is simply to “tax” producers of drugs outside the US for domestic consumption, then it will have a negative impact on businesses and potentially start a trade war, which could adversely affect other positive impact policy actions.

Increase resources to the FDA to reduce chronic staff shortages

Improved resourcing will help staffing to work on new drug approvals, generic-drug applications, and expedited applications.

Funding of the 2016 Cures Act

Signed into law in in December 2016, this bipartisan-approved act aims to support research for rare diseases, new approaches to streamline the drug approval process, the use of RWE in support of new indications, and increasing the focus on patients in drug development.

Potential Negative Impacts on Overall Industry Performance

Drug Prices

Establish a bidding process to allow the federal government to directly negotiate drug prices with drug companies for Medicare patients

The adverse consequences to pharma R&D investment, new drug innovation, and future beneficial effects on health/economic outcomes would be significant, as examined in a prior article (13). New drug pricing for Medicare would not happen in a vacuum; it would likely spill into and lower commercial plan prices, thereby establishing a lower “best commercial price” and even lower Medicaid pricing.

Allow US consumers to import drugs from foreign markets, thereby putting even greater pressures on pricing in the US market

This policy change is perhaps less likely to occur. Legally, re-importation of drugs can already occur, provided such drugs are certified as meeting FDA quality control standards and supply chain safety assurances of non-tampering and non-counterfeiting.

Affordable Care Act/Medicare Reform

Improve patient access to quality healthcare through ACA reform

The potential impact of this is uncertain. The process of “repeal and replace” Obamacare is still ongoing, and details as to what the replacement will be are not yet known. One patient group that has definitely benefitted from the ACA is the poor. For pharma, however, Medicaid is high-volume/low-margin business and also forces generic drug utilization to limit costs, which is negative for pharma.

The ACA has crowded out some small employer-based health plans – and whether employees have received access to better quality healthcare and improved drug coverage under the ACA is debatable. My estimate is that reforms to the ACA will lower the cost of accessing healthcare by eliminating mandated services that people do not need, enable plans to be sold across state lines (thereby increasing risk pools and competition), and allow for high deductible plans that were in effect before the ACA and worked to lower healthcare spending. Whether this results in improved access to drug plans that allow for greater spending on branded medicines remains to be seen.

Mandate greater use of generic and biosimilar drugs for Medicare patients

This policy approach would be consistent with Trump’s comments about leveraging the buying power of the federal government to lower drug costs for people – and would be negative for innovator drugs.

Labor Immigration

Restrictions on the issuance of visas for high-skilled immigrants

On his campaign trail, President Trump noted that the country’s H-1B visa program was being abused by companies and was bad for American workers. Restrictions on the visa program would limit pharma companies’ access to skilled workers if they cannot fill vacancies with American workers. Many biopharma consulting companies, such as those in the commercial analytics space, also use high-skilled workers from India and China, and have major off-shore operations in India. Restrictions placed on these organizations may prevent them from operating effectively, generating adverse effects for biopharma clients.

International Trade

Increase in policies that promote protectionism and possible trade war conflicts

President Trump’s “America first” philosophy will be clearly seen in his trade policies, reviewing and demanding revisions of multinational trade partnerships, such as NAFTA, while already nixing the TPP deal, to proposing a border tax for companies who leave the US and then send foreign-produced products back to the US. We will likely see tougher trade stances against the EU, China, and other countries that Trump feels have taken advantage of the relatively more open US market, while also making it difficult for American companies in foreign countries to do business.

The fear is a trade war and lower overall world prosperity, which will reduce global patented branded and biologic drug demand (while increasing generic and biosimilar demand). For biopharmaceutical MNCs, heightened global protectionism will make for more difficult business practices, and less freedom to operate where it makes more sense from an efficiency standpoint. Normally, the costs of such protectionism policies results in higher domestic prices, but with controls planned on drug prices, companies will be less able to cost-shift the effects of trade policies. Next overall effects will be to lower margins for companies, reduce R&D investment and opportunities for expanding the volume of business.

George A Chressanthis is Principal Scientist at Axtria. This article has been co-published with Axtria: and

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  1. Fortune, “Biotech stocks plunge after Trump says pharma is ‘getting away with murder’ on drug prices”, (2016). Available at: Accessed February 15, 2016.
  2. The Motley Fool, “Donald Trump just leveled drug companies with these 4 words”, (2016). Available at: Accessed February 15, 2016.
  3. The Washington Post, “Trump takes aim at drug companies: I don’t like what has happened with drug prices”, (2016). Available at: Accessed February 15, 2016.
  4. CBS News, “Democratic debate: which enemy are you most proud of?” (2016). Available at: Accessed February 15, 2016.
  5. Reuters, “Clinton outpaces rivals in drug company donations”, (2016). Available at: Accessed February 15, 2016.
  6. QuintilesIMS, “Outlook for global medicines through 2021: balancing cost and value”, (2016). Available at: Accessed February 15, 2016.
  7. Wall Street Journal, “Obama says Donald Trump will be driven by pragmatism not ideology as president”, (2016). Available at: Accessed February 15, 2016.
  8. Centers for Medicare & Medicaid Services, “2015 national health expenditure data”, (2016). Available at: Accessed February 15, 2016.
  9. Gallup, “Americans’ views of pharmaceutical industry take a tumble”, (2016). Available at: Accessed February 15, 2016.
  10. T Stossel, Pharmaphobia: How the conflict of interest myth undermines American medical innovation, 1st edition, Referencing Press: 2015.
  11. The Washington Post, “Trump’s win may be just the beginning of a global populist wave”, (2016). Available at: Accessed February 15, 2016.
  12. J Castellani, “The changing healthcare environment”. Presented at the Pharmaceutical Management Science Association Annual Conference, April 20, 2015; Arlington, VA, USA.
  13. Axtria Insights, “The relationship between drug price controls and patient health outcomes. White paper available”, (2016). Available at: Accessed February 15, 2016.
  14. PhRMA, “Advocacy intellectual property”, (2016). Available at: Accessed February 15, 2016.
  15. Axtria Insights, “Econometric analysis of biopharmaceutical transfer pricing”, (2016). Available at: Accessed February 15, 2016.
  16. R Peters, “Bio/Pharma’s 2017 agenda”, Pharm. Tech., 41, 16-18 (2017).
About the Author
George A Chressanthis

George A Chressanthis is Principal Scientist at Axtria.

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