Health

Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

It's November 9, and this guy is set to be America's 45th President. Americans are split between cheering and Googling Canadian citizenship requirements. Pharma and biotech currently seem to be on the whooping-with-joy side. 

The Nasdaq Biotech Index gained 7.5 percent on the Wednesday after Election Day -- its biggest jump since 2008 -- and big-pharma bellwether Pfizer rose 8 percent.

There are reasons for the industry to cheer this result, which probably means less risk of drug-price regulation -- a focus of the Clinton campaign -- and the failure of California's drug-price reform proposition.

But nothing has happened to shift the structural difficulties facing the industry. And so much uncertainty remains about what a Trump administration means for the economy that the celebrations should be toned down a bit. 

At Least Someone's Happy
Trump's election victory spurred the Nasdaq Biotech Index to one of its biggest one-day gains in years
Source: Bloomberg
Intraday times are displayed in ET.

The prospect of corporate tax reform presented by a Republican-controlled government is a legitimate positive for the sector. Big pharma and biotech firms have some of the biggest cash piles in America, and a good chunk of it is kept overseas for tax reasons. If companies can bring that back more cheaply, then they may be more likely to invest it instead of watching it moulder on their balance sheet.

This could lead to an uptick in both M&A in the sector -- completed deal volume is down more than $100 billion from last year -- and in biotech valuations. A deal spurt might happen regardless, as transactions put on the back burner until after the election get revisited.  

Dry Powder
Biopharma firms are among the companies with the largest cash piles, much of it parked overseas
Source: Bloomberg

Some of pharma's biggest bogeymen -- such as frequent pharma critic Bernie Sanders chairing the Senate's health-care committee, or drug pricing become a principal policy focus of a new administration -- have been put to bed. 

But expecting doctrinaire Republican drug policy from a man who ran anything but a doctrinaire Republican campaign is risky. Trump has criticized both the industry and its lobby and supported letting Medicare directly negotiate drug prices -- a policy long espoused by many Democrats and actively feared by the industry. 

The one policy decision we can feel pretty sure about is Trump's intention to gut or repeal Obamacare and scrap the Medicaid expansion without having proposed a particularly substantive alternative. Upwards of 20 million vulnerable Americans potentially losing access to affordable health insurance is not exactly salutary for drug sales.

And then there are broader questions about what Trump's neo-protectionist economic policies will mean for companies that do a lot business internationally -- not to mention the consequences of xenophobia and anti-immigration policies for an industry that employs a high share of skilled immigrants and owes so much to the many scientific advances they've produced. 

And completely independently of any policy action, there's plenty of price pressure to come. Pharmacy benefit managers have grown increasingly adept at pitting similar medicines against each other in order to drive prices down, forcing companies to give ever-higher discounts to keep market share. They've been so successful that diabetes drugmakers are suffering, along with makers of drugs to treat inflammation, multiple sclerosis, hepatitis, HIV, and many other illnesses. 

Even promising new drugs are struggling at launch, as price-conscious payers make expensive medicines difficult to prescribe. All of the above will likely get worse, regardless of how Trump acts. 

So enjoy today's rally, biopharma, but buckle up for the next four years.  

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Max Nisen in New York at mnisen@bloomberg.net

To contact the editor responsible for this story:
Mark Gongloff at mgongloff1@bloomberg.net