The outcome of the 2024 US presidential election is poised to affect the biotech sector as both major parties present policy proposals that could reshape drug pricing, regulation and research investment.
Biotech companies face uncertainty as Democrats and Republicans outline their health care agendas, according to RBC Capital Markets analysts.
The Democratic Party, led by Vice President Kamala Harris, has taken a more aggressive stance on drug pricing. Harris supports expanding the Inflation Reduction Act, which would allow Medicare to negotiate the prices of up to 50 drugs a year. This policy is likely to put pressure on companies that depend heavily on Medicare billing.
Companies like Gilead ( NASDAQ:GILD ) , Regeneron ( NASDAQ:REGN ) and Neurocrine ( NASDAQ:NBIX ) Biosciences, which have high IRA exposure, will likely face the most negative impact.
Expanding pricing controls in over-the-counter markets and capping out-of-pocket costs for generics could also squeeze margins across the sector.
However, not all biotech companies will be adversely affected by a Democratic victory. The Harris administration’s focus on mental health, women’s health and oncology could prove beneficial for companies developing treatments in those areas.
Companies focused on mental health, such as Intra-Cellular Therapies (NASDAQ:ITCI) and Axsome Therapeutics (NASDAQ:AXSM), as well as oncology companies such as Exelixis (NASDAQ:EXEL) and Nuvation Bio, stand to gain from expanded funding and access to care.
Additionally, the Biden administration’s decision to shield orphan drugs used for rare diseases from IRA price negotiations means companies like BioMarin and Ultragenyx may avoid some pressure on pricing.
On the other hand, a Republican-led administration, likely under former President Donald Trump, would provide a more favorable environment for biotech companies.
Republicans are expected to take a more moderate approach to the IRA, potentially making it easier to implement and reducing pressure on companies with exposure to Medicare.
RBC analysts point out that this could give a boost to companies like Regeneron and Neurocrine, which will benefit from a slowdown in IRA-related discounts.
In addition, Trump’s focus on chronic diseases could give a boost to companies developing treatments for such conditions, especially for children. Vertex Pharmaceuticals (NASDAQ:VRTX) and Jazz Pharmaceuticals (NASDAQ:JAZZ) are among the companies likely to benefit from initiatives aimed at improving chronic disease care.
In addition, Republicans are seen as more favorable toward mergers and acquisitions, especially if a less strict head of the Federal Trade Commission is appointed, which could prompt further consolidation in the biotech industry.
The GAP’s stance on drug pricing is not, however, without potential risks. While Trump has backed away from his previous proposal for a “most favored nation” pricing model, if revived, it could be more damaging than the IRA.
This policy would require the US to pay the lowest price for drugs globally, disproportionately affecting companies with significant price differences between the US and international markets.
Companies like Amgen ( NASDAQ:AMGN ) and Biogen ( NASDAQ:BIIB ) are likely to suffer from this scenario, especially if the policy extends beyond Medicare.
Another area of potential risk under a Republican administration is a de-emphasis on pandemic preparedness, which could hurt vaccine makers like Moderna ( NASDAQ:MRNA ) .
Trump’s previous policies have focused less on strengthening preparedness, a trend that may continue, reducing the administration’s focus on pandemic-related R&D.
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Reference;
Acharya, N. (2024) What is the US election impact on the Biotech sector By Investing.com, Investing.com. Investing.com. Available at: https://www.investing.com/news/stock-market-news/what-is-the-us-election-impact-on-the-biotech-sector-3660014 (Accessed: 13 October 2024).
