ViewPoints: Analysts prescribe positive sentiment for pharma industry in response to Trump victory in US Presidential election

Deutsche Bank

"At face value today's announcement of a Trump victory appears a relative positive for the sector. This is driven by the sector's defensive characteristics, as well as a rebound from the risk of escalating price pressure."

"It has been noticeable that the Republican Party and Mr Trump in particular have lacked any clear healthcare reform policy, bar Trump's wish to repeal Obamacare (without any major detail on a replacement). However, the clean sweep of the presidency, Senate and House of Representatives seems to eliminate risk of the most egregious of Democratic reform policies to the sector."

Credit Suisse

"Compared with Clinton, Trump gave few specifics on healthcare policy. In this sense, the pharmaceutical industry may have come under greater pressure if Clinton had been elected President. One clear difference is that Trump asserted he would scrap Obamacare, whereas Clinton intended to continue the Obamacare programme."

"However, a Trump presidency may not necessarily be positive for the healthcare and pharmaceutical industry. Trump appears to be in favour of increased Medicare rebates and the import of (cheap) foreign pharmaceuticals. Whatever happens, once Trump is inaugurated, the industry faces pressure to cut high drug prices in the US, however, it is clear that the timing of any debate and change is likely to be pushed back than under a Clinton win scenario."

Jefferies

"During his campaign, Trump has suggested support for importation of drugs, as well as increased scrutiny over drug price increases. However, his main focus appears to be on the repeal of the ACA, which expanded Medicaid coverage to the uninsured, poor population."

"Whilst repealing Obamacare would theoretically be negative for Large Cap Pharma, it is unlikely to be significant, in our view. Of the approximate 36 million previously uninsured in 2014, relatively few have signed up under Obamacare. Furthermore, given the significantly higher rebates paid under Medicaid, any incremental sales lost would be modest and carry a relatively low margin."

"Whilst a Trump presidency may carry more 'unknowns' and be negative for markets in general, our perception is that he poses a limited threat to the Pharma industry. Furthermore, if the markets suffer the expected general sell-off following Trump's win, Pharma's 'safe haven' characteristics could lead to it being a relative outperformer, particularly among the higher yielding stocks."

Bank of America Merrill Lynch

"We note that with a Trump presidency and Republicans maintaining control of Congress, we would expect an effort in 2017 to repeal and replace significant portions of the Affordable Care Act. In addition, we would expect that there will be less pressure on drug pricing and costs under a Republican Administration. However, there also remains considerable uncertainty as to other health care policy issues, including Medicare payment reforms, value based payments, ACOs, bundled payments, Medicare/Medicaid demonstrations, etc."

"Under a Trump Administration and a Republican Congress, we do not expect any significant or aggressive drug price controls or mandatory rebate proposals. We note that a Trump Administration may still include some uncertainty, as he has at times advocated for direct price negotiation of Medicare Part D drugs, and has called for re-importation of drugs, but, more recently, those proposals have not been a focus."

Morgan Stanley

"Despite a lack of clear direction and detail in his healthcare programme, we believe that a Trump victory may soften the impact of pharma pricing. Hillary Clinton had been widely viewed as posing a bigger risk to the drug industry because she had been critical of drug industry pricing and was more inclined to focus on the drug industry if elected President." 

"As a reminder, Donald Trump's main healthcare priority is to repeal Obamacare, which appears technically difficult (requiring long, technical negotiation of new legislation). Trump has proposed to modify laws preventing the sale of health insurance across state lines (individuals would be able to fully deduct health insurance premium payments from tax returns). He also said he wants prices to go down, but has given few details on how that can be done – he mentioned increased transparency (with a focus on clinics, hospitals and doctors) and parallel trade (importing drugs from Canada, where drugs are cheaper), but this is expected to represent volumes."

JP Morgan

"Not once were we asked about what it could mean if Republicans took both the White House and
Congress. Yet here we are. On top of that Proposition 61 was voted down in California. On paper this appears to be a favourable outcome for the biotech sector (certainly much more so than the clean democratic sweep people feared). That said, there is still an obvious element of uncertainty as Trump did not frequently speak to his healthcare agenda other than his views on Obamacare. We would expect the broader biotech universe to be a relative outperformer on the heels of this election (especially after limping into the vote), but more tangible fundamental developments are likely to take over in the relative near term."

"On the pricing front, the worst case scenario appears to have been avoided, but let's be real…changes are already in motion. We suspect the outcome of this election substantially diminishes the likelihood of significant pricing reform emanating from Washington. That said, we expect the industry to be increasingly self-policed and the broader focus on drug prices to continue."

Wells Fargo

"Trump did not have much anti-pharma to say during the campaign. Although, like Clinton, has expressed the idea that Medicaid should negotiate the price of drugs, most believe this is a lower priority item for him and that even this, if still on the table, is a much smaller threat than the list of proposals Clinton had proposed (such as re importation, price controls and others). Trump also spoke positively about tax reform and repatriation of cash efforts – two things that should help US pharmaceutical companies if enacted."

Societe Generale

"Trump’s 'healthcare reform to make America great again' is less focused on drug prices and more on access, coverage, transparency and tax deductions. Repealing Obamacare is now a credible scenario, as the Republicans have a majority in Congress. As for Pharma specifically, beyond some short-term relief, we still anticipate some volatility, given a lack of visibility on the future system overall."

"Interestingly, Trump is the first president-elect to have campaigned on restraining the cost of doctors and hospitals, which account for the bulk of the healthcare budget. This could be a source of savings and decrease the level of suspicion surrounding the Pharma industry’s allegedly high public prices, noting that drugs account for just 10% of total healthcare spending. Trump looks set to focus on the other 90%."

"We expect public and private sector payers to keep up the pressure on prices in areas where there is limited innovation and differentiation. Our central view remains that as long as Pharma companies innovate, they will be better positioned to negotiate prices."

Stiefel

"Aside from undoing ACA, we believe Trump’s priorities lie in infrastructure, which currently has no specific source of funding outside of Tax Reform (and likely repatriation). We think these priorities may take the wind out of Drug Pricing rhetoric near term."

"Pricing has not been front and centre of the Republican ticket, providing a bit of a reprieve for the industry. Mr. Trump has alluded to increased drug pricing scrutiny and a bigger role for government negotiating down drug costs as well as re-importation, but without any details. We would expect headline risk around this topic to dissipate, at least through the 'lame-duck' session. But, we do not expect broader structural challenges to go away, given the consolidating power of the PBMs and payers."

BMO Capital Markets

"We view a Trump presidency, Republican controlled congress, and defeat of Proposition 61 as significantly positive developments for major Pharma because they should lead to lower drug pricing pressure in the US, potential repeal of Obamacare with more industry friendly reforms, increased probability for lower corporate tax rates, and profit repatriation, which should in turn lead to increased capital returned to shareholders and more M&A. We see the news as positive for our entire coverage universe, particularly for Pfizer."

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