As the biopharma industry braces for a second term under President-elect Donald Trump, speculation is swirling around the returning administration’s effect on issues like Medicaid spending, the future of drug price negotiations and, of course, the great Robert F. Kennedy Jr. “wildcard.”

Still, given Trump’s focus on matters beyond healthcare and a more hands-off approach to government regulation, the life sciences realm is unlikely to face a major shakeup—at least for now—Baird’s biotech specialist Mike Perrone said in a research report.

Overall, “healthcare does not seem to be at the top of the Trump agenda,” Perrone, who is also a senior research analyst at Baird, opined Thursday. With other items like trade, immigration and the economy already populating the Trump agenda, any potential healthcare policy changes are “likely to come further down the line,” he predicted.

Further, the Trump administration has historically favored government deregulation, suggesting a “low likelihood” of an incrementally restrictive policy emerging, Perrone pointed out.

“The net is the status quo in healthcare is likely to persist for some time under the Trump administration, and less government scrutiny is typically a neutral-to-positive for the broader healthcare markets,” he explained.

As for areas to watch as the new administration files in, Perrone highlighted spending on Medicaid and the Affordable Care Act (ACA), the fate of the Inflation Reduction Act (IRA), the influence of RFK Jr., the future of the Federal Trade Commission (FTC) and Food and Drug Administration (FDA), as well as gradually lowering interest rates, which could lead to improved biotech valuations.

Though a wholesale change or repeal of the ACA “seems highly unlikely,” there is a chance reduced government spending overall could spur “some Medicaid cuts,” Perrone cautioned.

The situation is similar with regards to the IRA, where a repeal is unlikely but amendments to individual provisions could be on the way, Perrone said. Admitting that the “pandora’s box of Medicare drug negotiation is unlikely to close,” Perrone flagged the shorter negotiation-free window for small molecule drugs as a piece of the legislation particularly prone to potential amendment.

In a note to clients following the election on Nov. 5, analysts at Jefferies agreed that efforts to repeal the IRA are unlikely, arguing that healthcare policy overall is likely to “rank lower” on Trump’s legislative agenda compared to his first term.

Meanwhile, Baird’s Perrone called RFK Jr.—who was recently tapped to head up the Department of Health and Human Services (HHS)—“the biggest wildcard for healthcare post-election.”

While RFK Jr. has long been on the warpath against vaccines, Perrone said that it’s “hard to imagine wholesale changes to the decades long childhood immunization schedules.” The “real question,” to hear the Baird analyst tell it, is whether RFK Jr. will have a say in the FDA beyond food policy.

Perrone’s outlook tracks with that of BMO Capital Markets analyst Evan Seigerman, who wrote to clients last week that RFK Jr. is more likely to focus on U.S. food and nutrition policy rather than “targeting the pharmaceutical industry or parroting long-debunked rhetoric on vaccines (which have become culturally and politically unpopular).”

Seigerman argued that Trump’s pick for the FDA commissioner would hold more weight when it comes to health policy, adding that “there is little precedent in recent history for HHS policy dictating or affecting FDA regulation or approval of drugs.”

On the topic of the U.S.’ top regulator, Perrone noted that the FDA has been “very flexible” with regard to approvals in recent years, especially in terms of rare disease nods.

“Given that backdrop, any change to the FDA’s approach is likely to be more restrictive, with biopharma investors hoping the status quo is maintained,” he said.

One big question remaining is whether Trump picks another industry executive—as he did with Scott Gottlieb, M.D., during his previous term—or a “loyalist” to take charge of the agency, Perrone said.

“I think ability to function as an executive is going to be a very important one,” current FDA Commissioner Robert Califf, M.D., said of the traits he would appreciate in the agency’s next chief during the Friends of Cancer Research annual meeting earlier this month. Whoever assumes the role would benefit from “the ability to listen to people with disparate points of view and take in and learn in a new environment,” Califf added.

Califf also pointed to the importance of scientific integrity at the agency, noting that the incoming commissioner should “be someone who understands … the really critical role of high-quality evidence in everything that we do,” and who has “confidence that there is such a thing as expertise.”

Beyond the FDA, Baird’s Perrone suggested a second Trump term will likely mean a “less restrictive FTC,” which could, in turn, motivate more M&A activity. The analyst noted that 2024 was one of the first years in recent memory without a biopharma transaction valued above $5 billion though he admitted it’s unclear whether that’s more related to valuation sensitivity or fear of FTC scrutiny.

While Perrone is calling for a wait-and-see approach when it comes to the incoming administration’s effect on the biopharma industry, Trump’s appointments thus far have already had some economic impact on several large drugmakers.

Following the news of Trump’s RFK Jr. pick for the HHS last week, vaccine makers like Pfizer, GSK, Sanofi and Merck saw their shares dip by single-digit increments. Elsewhere, Moderna and Bavarian Nordic experienced more precipitous stock-price declines.

https://www.fiercepharma.com/pharma/biopharma-status-quo-likely-persist-under-trump-20-though-changes-ira-ftc-and-more-could-be