By Deena Beasley
SAN FRANCISCO (Reuters) – The biopharmaceutical industry aims to reverse last year’s decline in investor returns by 2025, but remains cautious about what President-elect Donald Trump’s priorities might be on hot-button issues such as drug pricing reforms. medications and vaccines.
The pharmaceutical industry faced its biggest regulatory change in decades with the Biden administration’s Inflation Reduction Act of 2022, which allowed the federal government’s Medicare health plan to negotiate prices for its most expensive prescription drugs for the first time.
“Nothing kills investment more than uncertainty. The IRA created a lot of uncertainty in the sector,” Steve Ubl, head of the industry lobby group PhRMA, said at the JP Morgan Healthcare Conference this week in San Francisco.
PhRMA is hopeful that the new administration will focus less on the industry’s “ecosystem attacks” and instead seek to reduce inefficiencies that would reduce costs for patients, it said.
Prices for the first 10 drugs negotiated by Medicare were released last August, and the results largely matched existing prices after discounts and rebates.
The names of the next 15 drugs for which prices will be negotiated must be submitted by February 1 and could be announced this week, although it is also possible that the final list will change after Trump takes office on January 20.
Last year, the Nasdaq Biotech Index fell 3%, compared with a 23% gain for the leader and a nearly 29% jump for the tech-laden Nasdaq. The Ark of the New York Stock Exchange Pharmacist (TADAWUL:) The index rose 1%.
The discrepancies came despite all-time stock price highs reached by obesity drug makers Novo Nordisk (NYSE 🙂 and Eli Lilly (NYSE 🙂). Lilly ended 2024 with a 31% gain, while Shares of Novo, which reported disappointing results in trials of a next-generation weight-loss drug, fell 9%.
“Growth has been uneven across the sector. There are haves and have-nots” as investors assess how drugmakers deal with looming patent expirations, said Roel Van den Akker, pharmaceutical deals leader at PwC.
PATENT EXPIRATIONS
Morgan Stanley (NYSE:) estimates that about $175 billion of US large-cap biopharma revenues in 2025 (35% of the total) will go off patent by the end of the decade.
To replace that revenue, drugmakers need new products, either from their own research or by acquiring companies with promising assets, but those transactions slowed significantly last year.
The value of life sciences mergers and acquisitions amounted to about $80 billion in the year to November, less than half of the 2023 total, according to the Iqvia Institute for Human Data Science. Last year no deals worth more than $5 billion were closed.
The expectation that the next Federal Trade Commission chair will be more deal-friendly than Lina Khan is seen as a positive for drugmakers.
A series of deals were announced Monday, including a $14.6 billion acquisition by Johnson & Johnson (NYSE:).
Trump nominated current commissioner Andrew Ferguson to succeed Khan. Investors are less enthusiastic about some of Trump’s other high-profile nominations for senior positions in his next administration.
“RFK’s views on vaccines could certainly affect some of the major pharmaceutical companies,” said Beth Neitzel, a partner at Foley Hoag, referring to Trump’s pick to lead Health and Human Services, Robert F. Kennedy Jr, who has been an outspoken skeptic about vaccines.
“I think the goal will also be to find common ground. Making America healthy is our goal,” Chris Viehbacher, CEO of Biogen (NASDAQ:), said in an interview during the conference.
PHARMA EXECUTIVES TO EXERCISE INFLUENCE
Pfizer (NYSE:) CEO Albert Bourla highlighted the industry’s uncertainty in his investor conference session, but said Monday he would try to influence the environment.
“There are a number of people who think that, for our industry, the risks outweigh the opportunities. There are other people, including me, who think the opportunities outweigh the risks. I guess we’ll see,” he said.
J&J CEO JoaquÃn Duato told investors that “it’s hard for me to estimate what’s going to happen,” adding that he would push policies with the Trump administration on innovation and access.
Investors are focused on the impact of government policy on drug prices, including any changes to the IRA that could affect how quickly individual drugs become eligible for Medicare price negotiations.
Those changes would be difficult to make because they are written into the law, said Priya Chandran, biopharmaceutical sector leader at Boston Consulting Group.
“It’s unlikely that anything will change dramatically in the first year,” he said.
Foley Hoag’s Neitzel said reports of Trump’s “warm and cordial” dinner in December with pharmaceutical executives in Florida have generated some optimism.
However, “the fairly universal statements from both Trump and RFK in the past about drug prices do not suggest that this incoming Trump administration is going to be helpful to the industry,” he said.