Pharma is hopeful about Trump’s second term — here’s what to expect for drugmakers

Pharmaceutical companies appear to be hopeful about their growth under a Trump administration, after former President Joe Biden took a hardline stance on the industry for the last four years. 

Like his predecessor, President Donald Trump will make lowering health-care costs for Americans a priority. It’s a popular bipartisan issue in a nation where patients pay two-to-three times more for prescription drugs than people in other developed countries. Trump has not yet outlined specific health policy plans, but his new administration will likely take a different, more pro-business approach than Biden’s did. 

Drugmakers hope Trump will focus more on cracking down on middlemen called pharmacy benefit managers, while taking heat off the prices the pharma companies themselves charge, promoting drug innovation and improving patient access to treatments. Those companies are particularly eager to see changes to Biden’s Inflation Reduction Act, which includes landmark provisions that aim to make medicines more affordable — but that the industry views as a threat to innovation and its profits. 

That was the sentiment during the JPMorgan Health Care Conference in San Francisco this month, the largest gathering in the U.S. of pharma and biotech executives and investors. The annual conference gives a pulse on the industry’s outlook for the year ahead. To no surprise, health policy questions dominated many of the conversations as Trump was heading into office.

Trump isn’t exactly a friendly face to the U.S. pharmaceutical industry, as he targeted companies and high drug costs during his first term through proposals like linking government payments for medicines to lower prices paid abroad. Still, executives stressed they are ready to work with Trump, who some described as being willing to hear out their grievances. 

“There are several people that think for our industry, the risks outweigh the opportunities. There are other people, among them myself, which they think that the opportunities outweigh the risks. I guess we’ll see,” Pfizer CEO Albert Bourla said during a presentation at the conference. 

“What we do as an industry, and as Pfizer, is engage with the new administration,” he later added. “We have very productive engagements and we try to explain the positions, I think that are well-understood.” 

Still, some executives acknowledged uncertainties around the new administration, such as the anti-vaccine views of Robert F. Kennedy Jr., Trump’s pick to lead the Department of Health and Human Services. Health experts have said that Kennedy, if confirmed by the Senate, may not do much to stop vaccine approvals, but could deter more Americans from taking recommended shots.  

“I think he represents the caution when it comes to the Trump administration,” BMO biotech analyst Evan Seigerman said. “You got to figure out how to work with him, right?”

Congress stripped out bipartisan PBM reforms in the final federal government spending package late last year, even after lawmakers for years introduced bills and held hearings to scrutinize them. 

But the pharmaceutical industry is “optimistic” that it will see PBM reform this year, as Trump, lawmakers and lawmakers from both parties are concerned about their practices, said Stephen Ubl, CEO of the Pharmaceutical Research and Manufacturers of America, the industry’s biggest lobbying group in the U.S. 

“I think there continues to be significant momentum behind PBM reforms, and there will be … legislative vehicles available this year to move them forward,” Ubl said in an interview with CNBC. 

He also pointed to a previous Trump proposal that the president could revisit: To eliminate the so-called safe harbor for rebates – a rule that sought to stop PBMs from keeping rebates and instead ensure that any discounts from drugmakers would directly reach patients.

Trump has signaled that he will target PBMs, saying at a news conference in December, “We’re going to knock out the middleman. We’re going to get drug costs down at levels that nobody has ever seen before.” 

But Trump still has to figure out if he will change the Biden administration’s approach to PBM reform, said Seigerman. Biden’s FTC Chair Lina Khan carried out an extensive investigation into the middlemen and then sued them for allegedly inflating insulin prices.

“The fact that it was a Lina Khan priority makes it harder for Trump because he’ll either outright reject something from the Biden administration or say, ‘We did it better,’ and take full credit,” Seigerman said.

Ubl pointed to three key reforms the industry wants to see, the first of which is “breaking the link” between a drug’s list price and how PBMs are compensated. 

Currently, the higher price of a covered drug leads to bigger potential rebates that PBMs can keep as profit. That incentivizes the middlemen to steer patients toward higher-priced medicines and keep cheaper generic and biosimilar drugs off of insurance formularies, or lists of covered drugs, according to Ubl. 

The second reform is to ensure the rebates reach patients at the pharmacy counter, which could be achieved by reviving Trump’s previous proposal or through other policies, Ubl said. The last reform would be increasing transparency around the PBM business model, such as the rebates they collect and their markup practices, since it is “largely opaque” to insurers and other stakeholders, according to Ubl. 

“We know the supply chain, PBMs are not transparent enough and we should be able to pass through more of that savings directly to consumers,” Eli Lilly CEO David Ricks said during a presentation at the conference.

PBMs deny that they contribute to higher drug prices, and often shift the blame to drugmakers who set the initial list prices for drugs before negotiations. Cigna’s Express Scripts, one of the three major PBMs in the U.S., has claimed that it passes more than 95% of all rebate dollars to its health plan clients.

Top PBM executives have also said they are open to increased transparency around their businesses, but companies have yet to make significant changes on that front.

The pharmaceutical industry is also hopeful that Trump could work with Congress to revise a piece of the IRA that allows Medicare to negotiate drug prices with manufacturers — a popular policy that could bring significant savings for senior patients. The Biden administration kicked off the second cycle of that process last week, unveiling the next 15 drugs selected for the price talks. 

But dismantling or scaling back the IRA would be difficult, Seigerman said. He pointed to Trump’s unsuccessful attempt to repeal and replace the Affordable Care Act during his first administration, even when he had control of the House and Senate. That law expanded insurance coverage for uninsured patients. 

Health policy experts previously told CNBC that it also seems unlikely that a Trump administration would want to scrap efforts to lower drug prices, a bipartisan issue that is top of mind for Americans.

Still, the industry will continue to fight the law in a flurry of legal challenges, which have so far been unsuccessful. Drugmakers argue that the provision will slash their profits, hinder investments in research and development for certain medications and result in unintended consequences for patients, such as fewer treatments and higher premiums. 

The industry also argues the process is government-mandated “price-setting” rather than negotiations since companies that don’t agree to the talks must either pay an excise tax or withdraw all their medications from the Medicare and Medicaid markets. Though in one failed court challenge last year, a federal judge argued that participating in those markets is voluntary. 

PhRMA’s Ubl said the biggest issue with the law is what the industry calls the “pill penalty.” The law essentially spares biologics like vaccines from new negotiated prices for 13 years after they receive U.S. Food and Drug Administration approval, compared to just nine years for small-molecule drugs that come in a pill or tablet form. 

The industry argues that the discrepancy discourages companies from investing in the development of small-molecule drugs, which are more convenient for patients.

Fewer small molecule drugs will likely mean fewer cheaper generic versions of them on the market in the U.S., Eli Lilly’s Ricks said during the conference. 

“I think that’s a terrible outcome because that’s the most efficient, cheapest thing going in health care,” he said.

A revision of the law would require legislative action, but Ubl said some changes could take place without Congress. For example, PhRMA does not believe all drugs with the same active ingredient should be up for price talks when they are approved under different names for different uses.

That was the case last week when Eli Lilly’s weight loss drug Wegovy, diabetes treatment Ozempic and another diabetes drug Rybelsus were selected as one product for the price talks since they share the same active ingredient.

Kennedy has long made misleading and false statements about the safety of vaccines, which have saved the lives of more than 1.1 million children in the U.S. and saved Americans $540 billion in direct health-care costs over the last three decades, according to CDC research in August. Despite his history, Kennedy told NBC News in early November that he isn’t planning to take anyone’s vaccines away in the U.S. 

But Kennedy could affect vaccine uptake without making federal policy changes. For example, some health policy experts have raised concerns about Kennedy using his new potential platform to spread anti-vaccine rhetoric and deter Americans from receiving recommended shots at a time when vaccination rates are already falling, especially among children.

“He’s very anti-vax, which isn’t great,” Seigerman said. “That’s not good for a company like Pfizer or Merck or GSK – all the folks that make the vaccines that we use.” 

During his presentation at the conference, Pfizer’s Bourla said Kennedy’s anti-vaccine rhetoric is in “complete contradiction” with what the company, regulators and the medical and scientific community believe. Pfizer delivered the world’s first Covid vaccine and markets shots for other diseases, such as respiratory syncytial virus and…