The Impact of the Presidential Election on Pharma: Q&A with Arthur Wong

Arthur Wong
Health care managing director
S&P Global Ratings

The recent election of Donald Trump as president of the United States is sure to have a significant impact on many industries, including the pharmaceutical and life sciences industries. Whether its actions that will have a direct impact, such as naming Robert F. Kennedy Jr to be head of the Department of Health and Human Services, or indirect impacts, such as his plans to place tariffs on certain goods, the industry is preparing for an uncertain regulatory landscape. Arthur Wong, health care managing director at S&P Global Rankings, spoke with Pharmaceutical Executive about the potential impacts of the election.

Pharmaceutical Executive: How will the expiration of ACA subsidies increase the uninsured population, and what will the wider impact of this be?
Arthur Wong: President-elect Trump is highly unlikely to seek to repeal ACA, though he may let several Biden-era subsidies expire at the end of 2025 leading to an increase in the uninsured population, with broader implications for the healthcare system:

• Increased Premium Costs & Uninsured Population: The likely 2025 expiration of ACA premium subsidies (enacted in 2021) would result in around 4 million people losing their insurance coverage due to unaffordable premiums. The Kaiser Family Foundation estimates an average increase of 79% in premium costs, making it difficult for many to maintain their insurance coverage. The Congressional Budget Office (CBO) estimates that the uninsured rate, which fell to an all-time low of 7.2% in 2023, could rise to 8.9% by 2034.
• Healthcare Access: A higher uninsured population means fewer people will actively seek healthcare services due to cost concerns. This could lead to worse health outcomes as individuals delay or forgo necessary medical care.
• Financial Strain on Providers: Hospitals and safety-net providers are likely to face higher bad debt expenses as more uninsured patients are unable to pay for services. This financial strain could be particularly severe for providers already operating on thin margins.
• Medicaid and Medicare Changes: Potential cuts to Medicaid and a shift towards Medicare Advantage plans could further complicate the landscape. Medicaid cuts would reduce funding for state programs, while the potential expansion of Medicare Advantage could limit provider networks and increase administrative burdens, negatively impacting healthcare providers and the health care services industry.

PE: What impact will the election results have on Medicare Drug Price negotiation?
Wong: The President-elect's support for Medicare drug price negotiations suggests that this aspect of the Inflation Reduction Act (IRA) will persist and potentially expand, posing challenges for the pharmaceutical industry while aiming to reduce drug costs for Medicare beneficiaries.

• Support for Negotiation: Despite plans to defund other parts of IRA, President-elect Trump supports the Medicare drug price negotiation aspect. This indicates that the negotiation process, which allows Medicare to negotiate drug prices for the first time, is likely to continue and will generate an estimated $24 billion in savings annually by 2031.
• Potential Expansion, a Negative for Pharma: With Republican control of Congress, there is a possibility that the President-elect could accelerate or expand the scope of Medicare drug price negotiations. This could involve negotiating prices for more drugs each year or implementing additional measures to lower drug costs, reflecting the populist support for reducing drug prices. This could potentially be more onerous and a negative for the pharmaceutical industry.
• Legislative Uncertainty: While bipartisan support exists for lowering drug prices, the specifics of any expanded or accelerated negotiation process remain to be seen.

PE: What impact will possible regulatory changes have on the industry from a financial stability standpoint?
Wong: Key positions like the heads of FDA, CDC, CMS, and NIH could offer insights into the effects of a second Trump presidency and Kennedy-led HHS. While changes are expected, we foresee incremental rather than radical shifts in health care. As a potential result, we anticipate a slight negative credit impact on health care companies from possible health care agency appointments.

PE: How will President Trump’s proposed tariff’s impact Pharma?
Wong: We believe the Trump Administration is unlikely to impose significant tariffs on pharmaceutical imports.

The U.S. health care industry increasingly relies on imports for pharmaceuticals, including active pharmaceutical ingredients (APIs). While China accounts for a growing portion of U.S. pharmaceutical imports, particularly APIs used in generic drugs, we believe the Trump Administration is unlikely to impose hefty tariffs on these imports to avoid increasing U.S. drug costs. Generics account for roughly 90% of all U.S. prescriptions, and tariffs would potentially raise costs for a significant portion of the market from a prescription basis. Given the recent shortages of generic drugs in the U.S., we believe the incoming Administration will be cautious and likely carve out pharmaceuticals from any future-imposed tariffs to prevent exacerbating these shortages.