Comment by: Hugo Schmidt, Portfolio Manager – Healthcare Services and Tools

The healthcare sector is one of the world’s most regulated, and the US election naturally has significant impact on future policy decisions. We identify a number of key points from the new administration and Congress that we believe will influence the sector:

The Trump administration is expected to appoint more industry-friendly leaders and officials to the agencies that regulate the healthcare sector, particularly the Centers for Medicare and Medicaid Services (CMS) and the Food and Drug Administration (FDA).

In 2022, the Biden administration launched the Medicare Drug Negotiation Program through the Inflation Reduction Act. The Trump administration is not expected to shut the program down, although we do expect that CMS, under Trump’s leadership, will adopt a more constructive approach to the negotiations. This should, all else being equal, benefit the pharmaceutical companies.

Another specific area where we expect a shift in CMS’s stance concerns Medicare, the federal program for health insurance for seniors. During the campaign, Trump suggested he would improve reimbursements rates, which would be welcomed by the Medicare Advantage payors, who have been struggling during the Biden administrations low-rate environment.

Incoming officials at the Federal Trade Commission (FTC), the antitrust authority, are also likely to be more industry-friendly, which will create a better climate for acquisitions. Large pharmaceutical companies face major patent expirations and need to bolster their pipelines, for example through acquisitions.

Finally, we note that the number of uninsured Americans will likely rise under the new administration. Republicans aim to eliminate the enhanced subsidies for the Individual Marketplace and will likely try to reduce costs within Medicaid through reinstating waivers for work requirements. However, this is likely to face opposition, particularly from the influential hospital lobby.