us election: impact on healthcare

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Overview

Political Views

Clinton Election Scenario

Trump Election Scenario

Future Of ACA

Industry Response

Implications Of Negative Outlook

Longer-Term View

Heather BreschMylan CEO

Martin ShkreliFormer CEO of

Turing Pharmaceuticals

Ian Read Pfizer CEO

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Political OutlookHealthcare is a moderate priority for candidatesA Clinton presidency, alongside Democrats retaking control the Senate, will see broad policy continuity with respect to the Barack Obama administration. However, we expect higher fiscal spending and a more protectionist stance towards international trade.

Policy Area Clinton Trump

Foreign PolicyPriority for candidate High High

Likelihood of enactment High High

Government Investment / StimulusPriority for candidate High High

Likelihood of enactment Medium Low

TaxesPriority for candidate High High


ImmigrationPriority for candidate Medium High


TradePriority for candidate Low High


HealthcarePriority for candidate Medium Medium

Likelihood of enactment High Low

Defence SpendingPriority for candidate Low Medium


Entitlement Spending (Social Security, etc)Priority for candidate Low Low


EnvironmentPriority for candidate Medium Medium


Monetary PolicyPriority for candidate Medium Low

Likelihood of enactment Medium Medium

Workers' IncomePriority for candidate Low Low

Likelihood of enactment Medium Medium

Fiscal Policy (Debt/Deficit Management)Priority for candidate Low Low


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Clinton Victory ScenarioIndustry Poised For A Challenging 2017Drug companies will be subjected to numerous revenue-limiting measures if Hillary Clinton becomes president. She has outlined several proposed initiatives to lower medicine expenditure. Clinton was one of the first politicians to admonish Martin

Shkreli on social media, calling his more ‘outrageous’. In the wake of the EpiPen scandal, Clinton released a plan to

respond to unjustified price hikes for long-available drugs.

She opposes tax inversion deals and wants to reward growth, innovation and jobs.

Clinton could also scupper the TPP, which is seen favourably by pharmaceutical companies.

"I've been fighting for universal healthcare for many years, and we're now on the path to

achieving it. I don't want us to start over again. I want to build on the progress we've made; go from 90% coverage to 100% coverage. I don't

want to rip away the security that people finally have; 18mn people now have healthcare; pre-existing conditions are no longer a barrier."

Hillary Clinton - 4th February 2016

Passage Increasingly At Risk

Image: Delegates protesting the TPP at the Democratic National Convention in Philadelphia in July 2016. Source: The New York Times

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Trump Victory ScenarioLess Negative But Higher UncertaintyProspects for drug companies are comparatively less negative in the event of Donald Trump becoming president, primarily because he advocates free market principles and will therefore be more tolerant of drug price rises. Plan to cut top tax rate on corporate profits to 15% from 35%

will be welcomed by drug companies. Goals of plan to replace Obamacare are broadened access,

more affordability and increased quality.

A key risk is greater contributions from industry to fund changes to the healthcare system.

Unpredictability and inconsistency will concern pharmaceutical firms.

“Because the drug companies have an unbelievable lobby. And these guys that run for

office, that are on my left and right and plenty of others, they’re all taken care of by the drug

companies. And they’re never going to put out competitive bidding. So I said to myself wow, let

me do some numbers. If we competitively bid, drugs in the United States, we can save as much

as $300 billion a year.”

Donald Trump - 13th February 2016

Easy Target For Repeal

Chart: Survey Of Americans - Do You Generally Approve Or Disapprove Of The ACA? (Percentage Of Respondents). Source: Gallup.

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Approve Disapprove

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Future Of ACAWill Require Changes Due To Lack Of Benefits And UnpopularitySince its introduction nearly four years ago, the Affordable Care Act (ACA) has had little impact on making care more accessible, cheaper and of higher standard.

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Chart: Percentage of individuals without health insurance. Source: Journal of the American Medical Association (JAMA).

Likely To Keep Popular Provisions First Time Uninsured Rate Below 10%

Example of the increasing politicisation of healthcare, as opponents are generally Republican supporters.

President Obama recommends that health insurance market places are bolstered through higher federal assistance.

A government-run insurance agency – the ‘public option’ – is a real possibility.

Uninsured rate unlikely to reach 0%, as those not yet covered are unwilling or unable to enrol in plans.

Image: Speaker of the House Paul Ryan discusses ‘A Better Way’ in September 2016.

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Industry ResponseThe Pharmaceutical Lobby Is Powerful And Will Have An Active 2017Rather than pointing to considerable R&D spending in order to justify high drug prices, industry associations will now increasingly focus on the value that innovations bring to individuals and society. In addition to the pharmaceutical lobby, there are other

concerned parties. Industry associations have adeptly driven the broader

discussion of the benefits of the pharmaceutical sector.

Unlike the recent drug pricing scandal, many other issues have not gained traction in the mainstream media.

Annual fee on prescription drugs compares favourably with Medical Device Excise Tax.

Boeing Co

Northrop Grumman

AARP

Blue Cross/Blue Shield

PhRMA

American Hospital Assn

General Electric

American Medical Assn

National Assn of Realtors

US Chamber of Commerce

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Chart: Leading lobbying client spenders (1998-2016) (USDmn). Source: Center for Responsive Politics.

Dominated By Healthcare Entities A Relatively Minimal Concession

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Annual fee on branded prescription drugs (USDbn)Fee as percentage of US prescription drug sales

Source: Internal Revenue Service (IRS). Note: 2016-19 IRS forecasts. * = and thereafter.

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Implications Of Negative OutlookExpenditure Forecasts Maintained, For Now… Whoever wins the presidency will be able to draw upon several items of already drafted legislation intended to improve the healthcare system and address the issue of high drug prices. Major pharmaceutical companies hold agnostic views on the

next president. In addition to scrutiny over pricing, drug companies have lots

of other issues to address.

Other developed states (Western Europe, Japan, Canada etc.) and emerging markets offer few opportunities.

The US will remain the stand-out proposition for providers of medical products and services.

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x-axis = per capita prescription drug spending in 2015 (USD); size of bubble = absolute market size (USDbn)

Local currency market growth (2015-20 CAGR %) United States

Japan

United Kingdom

Spain

Germany

France

Italy

Canada

Australia

South Korea

Mexico

Brazil

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Russia

The World’s Most Attractive Drug Market

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Longer-Term ViewOutlook Still Very Positive Compared With Other IndustriesPharmaceutical spending only accounts for 10% of total healthcare expenditure. Hospitals and care facilities, as well as medical professional services, account for over two-thirds of the total and can expect to face questions over their pricing strategies.

Hospitals and care facilities including home-based care

USD1,361bn

Medical pro-fessional ser-

vicesUSD802bn

PharmaceuticalsUSD298bn

Health insuranceUSD195bn

Government administration and activities

USD119bnInfrastructure and

capital expenditureUSD108bn

Medical devicesUSD103bn

ResearchUSD46bn

R&D-based firms have less to worry about than specialty medicine producers and generic drug firms.

There will be greater calls for transparency in the industry, especially from intermediaries in the supply chain.

Pharmaceutical companies will increasingly have to demonstrate the economic benefits of their medicines.

Investors will still have a significant interest in developers of innovative medical products that address unmet needs.

Unwarranted Focus On Medicine Costs?

Chart: US healthcare spending in 2014 by type. Source: Centers for Medicare & Medicaid Services.

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Contact UsTo enquire about any of the research and data featured in this presentation please contact us:

Email: [email protected]

Call: +44 (0)20 7248 0468

Visit: bmiresearch.com

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Through ‘Total Analysis,’ our unique, reflexive approach linking macroeconomic, industry and financial market analysis, we help clients gain unparalleled insight across 24 industries and 200 global markets.

For more than 30 years, our forecasts, data and analyses have been used by multinationals, governments and financial institutions to guide critical strategic, tactical and investment decisions. Clients include a majority of Global Fortune 500 companies.

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us election: impact on healthcare

Health & Medicine