Post-Election Decompression: Where Do We Go from Here?
After almost fifteen months of campaigning, polls, and 24/7 election coverage of “he-said-she-said,” we finally have our answer: President-Elect Donald Trump. Regardless of where you fall politically, or who you voted for, the top question on everyone’s mind is what is next for industry once Mr. Trump is in the Oval Office. Even still, knowing who the next president is, and which party will be in control of each chamber of Congress, there is a tremendous amount of uncertainty.
The rhetoric on the campaign trail often does not fully come to fruition once the candidate is elected; it is either tampered down a bit, or ramped up a bit, depending on what kind of platform the candidate ran on and where the candidate’s party wants the direction to go.
Mr. Trump’s major policy priorities have been: trade, immigration, infrastructure, and the Federal Reserve. One of the centerpieces of Trump’s economic platform was to reverse free trade, including declaring some countries as currency manipulators; putting tariffs on Mexico and China; renegotiating, or withdrawing from, the North American Free Trade Agreement (NAFTA); and exiting from the World Trade Organization (WTO).
As far as other campaign centerpieces, Mr. Trump promised to “build a wall” along the Mexican border and deport some or all undocumented workers, as well as pledging to invest heavily in infrastructure.
The outlook for the lame duck session remains uncertain: Speaker Paul Ryan and Senate Majority Leader Mitch McConnell are surveying their caucuses, working with the Trump transition team to determine the scope and length of the lame duck session. However, there are several “must pass” pieces of legislation for the lame duck session, including fiscal year 2017 spending bills and the National Defense Authorization Act. Additionally, the 21st Century Cures and Mental Health Reform legislation are likely on a “want to pass” column.
One vote certainly taken off the table with the election of Mr. Trump is the vote on whether or not to confirm President Barack Obama’s Supreme Court of the United States (SCOTUS) Merrick Garland. Senate Leader Mitch McConnell has already confirmed that confirming Merrick Garland to the Supreme Court will not be on the Senate’s lame duck agenda.
Passage of the Trans Pacific Partnership (TPP) is also unlikely during the lame duck session. While Senator McConnell has said that the Senate will not vote on the TPP this year, Senate Finance Committee Chairman Orrin Hatch has continued to negotiate with the White House. As alluded to above, Mr. Trump rejected the trade package during the campaign, and so we may see an increased pressure from the White House and pro-trade lawmakers for Congress to at least consider TPP before Trump takes office in January.
Trump’s First 100 Days
The first 100 days has been seen as the most important period of time for a new president to lay out their primary policy priorities. Again, Trump was a very unconventional candidate, and as such, his first 100 days may very well be unconventional as well. It is estimated that during his first 100 days, Trump will focus on repealing Obama Executive actions; legislation on building a wall on the southern border; Supreme Court nomination to replace Justice Scalia; Dodd-Frank reforms; and implementing a $550 billion (or larger) infrastructure plan.
21st Century Cures
Both Leader McConnell and Speaker Ryan have expressed a shared interest in passing a version of the 21st Century Cures Act during the lame duck session. However, a key sticking point for Democrats to pass the overarching legislation has been finding how to pay for additional funding for NIH. There is a group of unions and liberal organizations that are urging Congress to hold off on passing the legislation until after Trump is inaugurated, because they feel as though it would give lawmakers time to include provisions to address prescription drug pricing.
There have been numerous high profile oversight and investigation hearings in Congress, leading to criticism of the pharmaceutical industry acting as perhaps one of the few things legislators in both parties can agree on. If any movement is to be made legislatively, it would likely be focused on areas that have seen great bipartisan interest, such as expediting the approval of generic drugs in instances of steep price hikes.
However, once again, Trump ran an unconventional campaign as an unconventional candidate. While some believe that Trump will govern as a traditional conservative, there is no prior government experience of Mr. Trump to look to, to make an educated guess as to how he will govern. Trump has been known to embrace policies such as allowing Medicare to negotiate drug prices, price transparency across the field, and importing foreign drugs.
Medicare and Medicaid Reform
Republicans have long hoped to reform the nation’s entitlement programs, with full control of the legislative and executive branches. While any major overhaul of Medicare or Medicaid will always have political pitfalls, the odds are more likely than in recent history that there are major changes that could be made. One such suggestion made by House Republicans is changing the Medicare program from a system where recipients are entitled to defined benefits to one that works more like a defined-contribution system, where beneficiaries receive a set amount of federal subsidy dollars to help them purchase coverage.
While it is still too soon to be sure how the election will affect the industry, what is sure is that Pharma stocks immediately benefitted from the election results. Short-term success does not confirm that the gains will continue, but as of November 9, 2016, the NYSE Arca Biotechnology Index jumped 8.9%, Allergan shares rose 8%, Celgene Corp. rose 8.6%, and Pfizer Inc. rose 7%. Drug wholesalers and other industry middlemen also got a boost, with McKesson up 6.4% and Express Scripts up 3.4%.
With a fully-Republican federal government, it is possible that we finally see the stalemate in Washington break. However, with great power comes great responsibility, and the ability of the Republican-led government to govern will be tested over the next two years and has the potential to result in major legislative reforms being implemented during this period, circa 2008-2010, when Democrats controlled the executive and legislative branches.