YEAR IN PHARMA
POLICY
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t was a sound bite that reverberated through the drug industry. On Jan. 11, in his first news conference as president-elect, Donald J. Trump castigated pharmaceutical companies as “getting away with murder.” In the next breath, he vowed to shake up how the government paid for drugs. Those 29 seconds of commentary sent the biotech stock index down 3%. It would become just one of many off-the-cuff remarks directed at the pharmaceutical industry in Trump’s first year in office. The price negotiation threat has so far turned out to lack teeth. But the general uncertainty around key issues in the Trump agenda— the fate of health care reform, corporate tax reform, even the ability to bring talented foreign scientists to the U.S.—has left companies and investors on edge. For investors, the uncertainty wrought by Trump poses a challenge. “In a world where an Administration is more unpredictable, that’s a net negative for many of us,” says Bruce Booth, a partner at life sciences-focused Atlas Venture. “We prefer clear policy agenda items, clear choices, and therefore things we can evaluate in our scenario planning for the next three to five years. We would all
Navigating an unpredictable Administration Empty threats and promises from Trump left drugmakers grappling with uncertainty
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benefit from an Administration who is more consistent, more predictable, more measured in the way that it approaches these subjects.” The failed attempt to push health care reform through Congress ate up much of the agenda for the new Administration, leaving little progress on the one issue that drug industry watchers agree would markedly affect pharma companies in 2018: tax reform. The high corporate tax rate in the U.S. has caused many companies to park substantial cash overseas—$150 billion, Ernst & Young estimates. Until a 2016 Treasury Department rule made it more difficult, the high taxes even prompted some companies to acquire overseas firms in order to shift their headquarters to countries with more favorable tax codes. Trump has proposed a law that would encourage companies to repatriate, or bring back, that overseas money, a possibility that many in the industry say could spur big pharma firms to do more deals. Merger and acquisition activity was modest in 2017. “If we allow for repatriation at a lower rate of 10 to 15%, some good things could come out of it because a lot of money is sitting outside the U.S.,” says Ambar Boodhoo, Americas transactions services life sciences leader at Ernst & Young. “I’m hoping they don’t take the cash and just start buying back shares and paying dividends.”—LISA JARVIS
C R E D I T: RO N SAC H S /S IPA /N EWS CO M
Trump had a friendly meeting with pharmaceutical executives at the start of the year but has been adversarial on social media.
