FREE

Biopharma Outlook for 2H24

Biopharma may avoid the usual uncertainty around election cycles, as smid-cap biotech recovers from a tough capital markets period and large biopharma is fueled by the obesity space. We highlight four biopharma themes and trends heading into 2H24. Presidential Election Priorities Focused Less on Healthcare Costs Versus Prior Cycles Election uncertainty may not affect biopharma. In presidential election years, uncertainty around the outcome can weigh on the biopharma industry. Prior to the 2020 election, the NBI averaged a 5.3% annual return in election years since 2000, compared with 12.2% on average for non-election years. Healthcare reform and drug prices have been among the priority issues for election campaigns and political rhetoric often increased headline risk for biopharma. The 2020 election year was different, as the industry benefited from the pandemic-driven low interest rate environment and emergency regulatory process, despite healthcare being the top issue for voters, including lowering drug costs. For 2024, unlike recent election cycles, healthcare has fallen in priority (except for abortion rights), with preserving democracy, immigration, and inflation as the leading issues so far. Healthcare costs, however, remain a voter concern, which could bring drug prices back to the forefront and pressure biopharma in 2H24. Probably because candidates agree on lower drug costs. Neither a Trump nor Biden victory would be a boon for biopharma, as both have expressed a desire to lower drug costs. Under Biden’s presidency, he passed the Inflation Reduction Act (IRA), which allows Medicare to negotiate drug prices for the first time, in addition to lowering out-of-pocket drug spending and capping insulin prices for all Medicare patients. Trump at the end of his term signed four executive orders in attempt to lower drug costs, including the importation of drugs and Most-Favored-Nation pricing for Part B drugs. While none were ever implemented, Trump’s plan would be the biggest risk to biopharma drug pricing power if carried out. The most benign outcome would be a divided government, which will likely maintain the status quo, leaving biopharma to navigate the IRA and heighten FTC scrutiny. A Democratic sweep would increase pressure on drug prices, as Biden and Senator Sanders recently criticized the high costs of obesity drugs. A Republican sweep could mean a partial repeal of the IRA, targeting primarily spending but leaving Medicare provisions. Combined with Trump’s push for higher tariffs on Chinese goods, a Republican controlled government could be more inflationary, which would lead to a difficult capital markets environment for biopharma again.