Although the election results are now clear, the impact on the biopharmaceutical industry remains uncertain. Here are some key observations:
It is unrealistic to expect that the Republican sweep will bring an end to IRA price “negotiation.”
Despite the IRA and its Medicare drug price regulations facing criticism from Republicans in Congress, it is unlikely that the industry-opposed provisions will disappear or undergo significant changes. The drug provisions of the IRA as a whole – negotiation, inflation rebates, and changes to mandated company rebates on Medicare Part D drugs – saved a significant amount of federal spending. Therefore, the CBO scorekeepers would say that any attempt to repeal the provisions or make changes, such as aligning the period when negotiation starts for small molecule drugs and biologics, will increase government spending. If Congress sticks to its usual requirement to find offsetting budget savings for such changes, it will be difficult to produce the needed funds from sources other than the industry itself. It is also unlikely that the Trump Administration will take unilateral action to delay implementation of the IRA-negotiated prices, as that would be viewed as a give-away to the drug industry.
Tax policy will dominate the political agenda, and biopharmaceutical issues could be a part of that story.
Adding to the challenge of paying for changes to the IRA that would benefit the industry is the looming tax policy debate. The major tax cuts that the Republicans passed in the 2017 Tax Cuts and Jobs Act are set to sunset at the end of 2025. According to an estimate from the respected Committee for a Responsible Federal Budget, extending the tax cuts for another ten years could add $9.15 trillion to the federal deficit. Also, as a candidate, Trump proposed additional tax cuts, including eliminating taxes of tips and Social Security income. While Trump and Congressional Republicans may waive requirements to offset some of the costs of extending and expanding tax cuts, it is likely that many Congressional budget hawks will want to see at least some of the costs offset. And that is where the President and Congress might look to the deep pockets of the biopharmaceutical industry for funds.
While the Democratic agenda of expanding IRA “negotiation” may be off the table, other ideas remain possible.
Deficit concerns and the desire to take advantage of the political appeal of reducing drug costs in advance of the 2026 mid-term elections may lead the new Administration and Congress to seek further savings from the drug industry. Expanding on the Biden Administration’s drug pricing agenda is unlikely, given that such a move might tacitly give the Democrats credit for the program’s creation. However, that does not mean that the White House will not advance other ideas to change drug pricing. The first Trump Administration released a drug pricing blueprint in 2018 that promised to reduce both drug prices and out-of-pocket costs. While the Administration bungled much of its early drug pricing agenda through inaction and procedural mistakes, it is certainly possible that the next Administration could revive and expand on its 2018 ideas.
Key appointments by Trump will influence the agenda
While much of the future of drug pricing legislation and regulation may depend on federal budget policy, much may also depend on whom Trump appoints to key positions, including HHS Secretary, CMS Administrator, and head of the White House Domestic Policy Council. Trump has announced his intention to nominate Robert F. Kennedy, Jr. to run HHS. Echoing comments made by the President-elect, Kennedy has expressed support for capping drug prices based on the prices in other industrialized nations. The HHS Secretary and other key Administration positions will have a lot to say about a second term Trump drug pricing agenda. These appointees will have the authority to amend regulations, including for the IRA negotiation program, that could deliver benefits to the industry. They will also hold the keys to the actual drug negotiation price-setting and could, through the broad discretion that the law gives CMS, impact what Medicare will pay for drugs in future years.
Whether Congress or the White House will drive health care policy will also be critical
Most changes to drug pricing policy will need to get through Congress. The most likely avenue for changes is the Congressional budget reconciliation process, which will allow Trump and Congressional Republicans to pass legislation without any Democratic support. Given this, House and Senate Republicans could play a lead role in health care policy, including drug pricing policy. At a minimum, they may have some influence on the agenda. As Congressional Republicans might be more friendly to drug industry concerns than Trump or his appointees, it is worth watching the role they will play.
Trump’s transactional view of governing could present the industry with some tough choices
Trump has often taken a transaction approach to business and governing. He likes to wield threats to gain concessions. Biopharmaceutical CEOs may find themselves once again in the White House to make pleas, face demands, and cut deals as they did during Trump’s first term. With the leverage of a pending budget reconciliation bill each year and the lever of Medicare drug price setting, Trump may demand industry acquiescence to drug policy changes for which he can claim public credit.
Summary
In any other election in which Republicans swept control of the White House, Senate, and House of Representatives, the biopharmaceutical industry might believe it could rest easy. However, Trump has moved the Republican party away from its pro-big business agenda and towards a vigorous populist view of economic policy. That move means that the biopharmaceutical industry can take little comfort in the new Washington lineup. This does not mean that the industry will make no gains. In fact, the prospects for advancing its agenda are likely much better than they would have been with a different election outcome. Instead, it means that any wins on such issues as reforming the IRA negotiation rules or reigning in the 340B drug discount program will come at a price that may create winners and losers among companies.