In the dawning of a new year and a new administration, healthcare investors cannot help but question as to what this will all mean for the pharmaceutical industry. What we know to be true: Donald Trump is officially the 45th President of the United States. With a Republican-dominated government and House Speaker Paul Ryan marking Obamacare, a.k.a. the Affordable Care Act, as his public enemy number one, how will legislative reforms hit stocks in this sector?
A repeal of this magnitude is not going to wrap up neatly into a paltry sum, and these kinds of consequences could balloon throughout the industry.
Maxim analyst Jason Kolbert shares his two cents on the matter. While the analyst acknowledges that there is certainly room for foreboding as each investor tries to predict where the next piece of the healthcare puzzle will fall, he believes, “The future is not necessarily bleak.”
Let’s say we say Obamacare is on its way out. Kolbert opines, “This change, combined with President Trump’s economic nationalism and attacks on drug pricing, create an atmosphere of doubt and uncertainty for the pharmaceutical industry. Additional complicating factors include the expiration of the Prescription Drug User Fee Act and the Generic Drug User Fee Act in September of this year. The fees generated by these pieces of legislation contribute to the majority of the revenue supporting the drug approval process. Legislative replacements will need to be enacted to ensure the status quo or improvement to the current rate of NDA and ANDA approvals. For the past 25 years, Congress sought to pass clean User Fee bills. That has never happened and is unlikely to happen this year.”
Moreover, whereas we once were experiencing a period where private payers sparked growth in sales and fostered a time of trailblazing therapy innovation, Kolbert sees the flip side of the coin where new administrative focus will lead investors to flash a caution light in its wake.
So wherein lies the positive in Kolbert’s cautiously optimistic take on what domestic healthcare will entail for these next four years? The analyst sees an advantage in an administration raring to take on reform of drug prices that need to be scaled down their current cliff.
One example that could come into play would be a Best Price assessment of Medicaid rebates contingent upon the pharmaceutical expenses in a given company’s tax residence. From the analyst’s eyes, this angle would make sense under a Trump agenda rooted in “economic nationalism,” to “encourage the repatriation of US companies and manufacturing from foreign countries.”
Meanwhile, maybe Trump’s leadership will issue in an era of expedited approval for generic drugs, which the analyst notes could be deemed an ideal way to diminish rising costs for drugs and healthcare in a modern-day context. Furthermore, the analyst applauds any potential for cost reductions for both the industry as well as for the consumers who would surely benefit.
Ultimately, Kolbert detects a silver lining of glimmering “hope in the midst of uncertainty,” and urges investors to proceed accordingly.
Related tickers: VRX, GILD, GALE, ACAD, EXEL, SRPT, NVAX, SGYP, MSTX, CEMP, OPK, SPHS, PTX, AUPH, IBB