U.S. Election Update: The Outlook for Life Sciences
Those involved in life sciences have been keenly following the 2020 election to get a sense of how it will impact the industry. As of November 9, former Vice President Joe Biden is projected to become the 46th President of the United States—even as legal challenges by President Trump could delay the final results. Close elections in Georgia mean that there will be a runoff for the state’s two Senate seats, both currently held by Republicans, that will either result in Republicans narrowly retaining control of the chamber, or a 50/50 divide, in which case Vice President-Elect Kamala Harris would vote to give the majority to Democrats. Finally, the House of Representatives is projected to have a narrow Democratic majority. While political pundits will try to explain how we arrived here, as well as the broader implications for the political system at-large—below we will focus on what this outcome will mean for the life sciences industry.
The likelihood of a divided government in Washington suggests that substantive healthcare reform is unlikely to occur during the first two years of the Biden Administration, as they will not have the overwhelming Congressional support necessary to advance large-scale legislative reforms such as leveraging Medicare to negotiate lower drug prices. The House of Representatives is likely to double down on structural reforms proposed in H.R.3 and similar legislation may pass the House again next year, only to die in the Senate. We wouldn’t rule out the possibility of a legislative deal on more incremental reforms, however, considering that prescription drug pricing has consistently been a top concern among voters from both parties. For Biden, who prides himself on pragmatism and compromise, and Senate Republicans who are already eying the 21 seats they will need to defend in the 2022 election, this could provide a mutually beneficial opportunity to make a deal.
In the Senate, key healthcare committees will likely remain under Republican control, but significant leadership changes could impact drug pricing legislation. Most notable is the Senate Finance Committee, where current Chair Chuck Grassley (R-IA) will have to step down from his position due to term limits. Sen. Grassley is known for his willingness to take on the healthcare industry, championing bipartisan drug pricing legislation (S. 2543). His anticipated replacement, Mike Crapo (R-ID), has stated opposition to this legislation, making it unlikely that the committee will originate significant drug pricing reform legislation in the next two years. In addition, the Senate Committee on Health, Education, Labor and Pensions (HELP) will have a new chair with Sen. Lamar Alexander’s (R-TN) retirement. Sen. Richard Burr (R-NC) or Sen. Rand Paul (R-KY) are the likely successors to the position. Burr is known for both his willingness to negotiate and his expertise on regulatory policy, while Paul’s libertarian leanings could steer the Committee in a very different direction.
Most immediately, however, the focus in Washington will be on the COVID-19 response. According to Biden’s campaign, his Administration would invest $25 billion into a vaccine manufacturing and distribution plan that prioritizes equitable access, while ensuring that FDA scientists control all decisions related to safety and efficacy. Biden’s transition team on November 9 released details of a “coronavirus advisory board” comprised of public health experts that will advise the President-elect on an approach to fighting the virus. For pharmaceutical companies working on a potential vaccine or other therapeutic solutions, the Biden Administration’s plan—especially its focus on listening to scientists—will likely provide air cover against public criticisms related to the speed of vaccine development, distribution, or safety. Pharmaceutical companies may be able to better control the narrative related to vaccine development due to the focus on safety, in contrast with the Trump Administration’s focus on speed.
As the election outcome became more certain, healthcare stocks sharply rose—indicating the immediate perception that the industry will benefit from the election results. While lawmakers in the 117th Congress will continue to face public and political pressure to reduce healthcare costs, a split government will mitigate the risk of significant legislative threats to the industry. In addition, divided government and more narrow majorities in both chambers will make it important for interested parties to engage with policymakers on both sides of the aisle to ensure their concerns and priorities are heard.
