January 18, 2025
Like many industries preparing for Donald Trump's second term as president, the prospects for the healthcare industry are a mixed bag.
But headwinds, like tariffs and drug pricing, are clearly blowing strong. And analysts on the sidelines are waiting and watching.
"While uncertainty around policy changes has sidelined investors, we think potential administrative changes under President Trump and relevant nominees will get more clarity in early 2025 through the appointment process," Leerink Partners analysts wrote in a note in December.
The three key issues in the spotlight are China, tariffs, and drug pricing.
China is an important market for the pharmaceutical industry for two reasons.
First, it is a source of revenue and competition globally : Large pharmaceutical players like Merck ( MRK ), Johnson & Johnson ( JNJ ), and AstraZeneca ( AZN ) have significant presences there. It is also a major source of active pharmaceutical ingredients (API), which are the base materials used in treatments and biopharma products.
In a note during third quarter earnings back in October, Mizuho noted that J&J, for example, is the largest player in China's medical technology market and gets 5% of its revenue from there. Meanwhile, China is growing in the global pharma market , accounting for 12% of the global market in 2021, second only to the US at 40%.
China's exports to the US have also increased, rather than decreased, since the pandemic. Since 2020, US imports are up 485% , from $2.1 billion in 2020 to $10.3 billion in 2023.
Billions hang in the balance as Trump's pro-business reputation could clash with congressional efforts to pass the Biosecure Act , according to Jefferies analysts. The legislation would prevent any entity that receives federal funds — such as research grants — to engage with companies in China. That includes purchasing APIs, creating demand for new partners. China currently accounts for 13% of the world's API manufacturers, according to the FDA .
"Lowering drug prices is a focus area for both Republicans and Democrats, and Chinese CDMOs [manufacturers] such as Wuxi Group play a key role as it helps the US pharma cut costs by 30-60%. Trump administration is also likely to be more business-friendly and there is pressure from US Pharma against Biosecure Act, which makes it less likely for the act to come back next year," the analysts wrote.
The tariffs could also negatively impact the med-tech sector, which would not only make medical supplies and devices more expensive but potentially add to the cost of associated surgeries and other medical procedures, increasing insurance costs.
Experts think medical supplies and devices could be excluded from the tariffs .
Drug pricing is the final key issue facing the health sector in 2025, but analysts expect this won't actually come to a head until 2027.
The Biden administration's implementation of Medicare drug pricing negotiations from the Inflation Reduction Act could set a roadmap for more aggressive negotiations down the road, but the upcoming year's prices have already been set or are currently in negotiation.
Meanwhile, Trump could try to revisit lowering overall drug costs by increasing the prices other countries pay. But that could be a tough fight.
"We will have to see, for example, if President Trump criticizes US drug prices during his state of the union address and if his officials attack drug prices," Leerink Partners analyst David Risinger wrote in a note last month.
He added, "It is also possible that the Trump administration seeks to drive Medicare Part D drug prices lower via 'tougher' IRA negotiations, so we’ll have to watch for potential future IRA price negotiation guidance document updates."
Anjalee Khemlani is the senior health reporter at Yahoo Finance, covering all things pharma, insurance, care services, digital health, PBMs, and health policy and politics. That includes GLP-1s, of course. Follow Anjalee on social media platforms X (Twitter), LinkedIn Bluesky @AnjKhem .
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