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How the US election could affect the pharmaceutical industry

Published on 04/11/20 at 01:18pm

The US is one of the most lucrative markets for the pharmaceutical industry. This is a country where a lack of strict price regulation can see companies make record profits, while also getting many of their research and development projects subsidised by the government. It is where Pfizer, Bristol Myers Squibb and Eli Lilly began their businesses, and all notable pharmaceutical companies have a major US presence.

Democratic presidential nominee, and former Vice-President, Joe Biden and President Donald Trump have two drastically different visions for the next four years of American politics, and this expands to pharmaceuticals and healthcare.

In terms of policy, one of the biggest issues facing the American people in terms of pharmaceuticals directly is the cost of buying prescription and over the counter drugs. American spending on medicine has increased nearly 42% over the past decade rising from $253.1 billion in 2010 to a projected $358.7 billion by the end of 2020. In September, President Trump signed an executive order attempting to lower drug costs. The order instructs the US Department of Health and Human Services to begin the rule-making process to start a payment model for some medicines, but overall the order has remained vague. It is simply designed to test the impact of such a change, meaning that cuts to drug prices won’t come into effect for at least months to come. The same month, Trump also announced that his government would allow the importation of cheaper Canadian drugs without the direct approval from the Department of Health and Human Services.

These executive orders are symbolic of the Trump administration’s general action towards the pharmaceutical industry and the price of drugs. There have been multiple executive orders and promises but relatively little action. For example, in July Trump signed executive orders to discount prices on insulin and epinephrine for low-income patients, and another to guarantee Americans pay the lowest available prices among developed nations for Medicare Part B drugs. Without Congress passing legislation to enshrine these into law, most orders have not had an impact.

Despite Trump having what some have described as a close relationship with the pharmaceutical industry – supposedly demonstrated by making former President of Lilly US Managed Healthcare Services, Alex Azar, the US Secretary of Health and Human Services – he has managed to draw their ire on a number of occasions. In 2018, Trump and Azar announced a proposal which would require pharma firms to include, on their television adverts, the list price of any drug paid for by Medicare or Medicaid that cost more than $35 a month. In 2019, Amgen, Eli Lilly and MSD sued the Trump administration to try and block these measures, and later that year a Washington, DC District Judge ruled in favour of the drug companies, stating that the Trump administration’s measure violated First Amendment rights.

The Biden campaign has promised to introduce far more stringent measures to enforce the regulation of drug prices. One of the most notable is his supporting legislation that the Democratic-controlled house passed last year, which would see the government negotiate drug prices. It would mandate that they negotiate the price of at least 25 Medicare Part D drugs annually, and require federal authorities to hammer out the cost of at least 50 medicines a year. Another part of the bill would limit drug manufacturers’ ability to annually hike prices on Medicare drugs, which will force them to rebate the portion of the increase that is above the rate of inflation. This would help lower the drug prices for the 67.7 million Americans who use Medicare, and the bill also wants to expand these requirements to the private sector. However, the Senate would also need to fall into Democratic control to get these measures passed into law.

Biden has also advocated for creating an independent review board to set price caps for new medications that have no direct competitors. He has also floated the idea of ending tax breaks for drug company advertising and limiting their leeway in raising their drug prices.

Something both Trump and Biden share similar views on is the need to become more self-sustainable in terms of drug development. Both now view it a national security issue. Most of the world’s drug ingredients come from India and, more importantly, China and the COVID-19 pandemic has exposed how delicate this supply chain is. As China becomes a bigger rival to the US, both parties feel the need to decrease reliance on the rival nation. Trump has taken steps to change this, although some have been controversial. In early August, the Trump administration approved a $765 million deal with Kodak, under the Defense Production Act, to produce drug ingredients. The terms of the deal would see Kodak make essential drug ingredients that are currently in short supply according to the FDA. This prompted an insider trading investigation that eventually found no wrongdoing. However, Trump has still not laid out a comprehensive plan to bring pharmaceutical manufacturing back to the US.

Biden has accused Trump of failing to secure America’s drug supply chain when he announced his supply chain manifesto back in July. He said if he was elected he would use the power of Medicare, Medicaid, the US Department of Veterans Affairs, and other federal agencies to favour drugs made in the US; consider direct compulsory licensing of vaccines where companies are either slow to produce them or are charging excessive prices; reverse President Trump’s tax codes to incentivise ‘onshoring’ of pharmaceutical companies and their supply chains; open new markets to US exports; and also, where necessary, restrict imports from nations such as China and Russia that pose potential national security threats.

While the presidential election is important for the future of the US and the American pharmaceutical industry, the Senatorial elections remain key to deciding how much of a future president’s agenda can be passed. As seen with the inaction of the Trump administration, and the plans of Joe Biden, each candidate is going to need the Senate on their side. The Republicans will be defending 23 seats in 2020, while the Democrats will only be defending 12. The Democrats need to maintain these and pick up three or four seats to flip the majority in their favour.

Conor Kavanagh

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