Like many industries preparing for Donald Trump's second term in office, the outlook for healthcare is mixed.
However, headwinds such as tariffs and drug pricing are clearly blowing strongly. Analysts on the sidelines are also taking a wait-and-see approach.
“Uncertainty surrounding policy changes is holding investors back, but potential administrative reforms under President Trump and related candidates are expected to continue in 2025,” analysts at Leerink Partners said in a December note. “We believe there will be more clarity through the appointment process early in the year.”
The three key issues being watched are China, tariffs, and drug prices.
China is an important market for the pharmaceutical industry for two reasons.
First, it is a source of revenue and global competition. Big pharma companies like Merck (MRK), Johnson & Johnson (JNJ), and AstraZeneca (AZN) have a significant presence there. It is also a major source of active pharmaceutical ingredients (APIs), the building blocks used in therapeutics and biopharmaceuticals.
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M.R.K. JNJ AZN
In its third-quarter earnings report in October, Mizuho noted, for example, that J&J is the largest player in China's medical technology market, from which it derives 5% of its revenue. Meanwhile, China is growing in the global pharmaceutical market, accounting for 12% of the global market in 2021, second only to the United States with 40%.
China's exports to the United States have also increased, not decreased, since the pandemic. Since 2020, U.S. imports have increased by 485%, from $2.1 billion in 2020 to $10.3 billion in 2023.
Analysts at Jefferies say billions of dollars are at stake as Trump's pro-business reputation could collide with Congress' efforts to pass biosecure legislation. The bill would prohibit companies receiving federal funds, such as research grants, from engaging with Chinese companies. This includes purchasing APIs, creating demand for new partners, etc. According to the FDA, China currently accounts for 13% of the world's API manufacturers.
“Reducing drug prices is an area of focus for both Republicans and Democrats, and Chinese CDMOs (manufacturers) such as Wuxi Group play a key role in reducing costs for U.S. drug companies by 30 to 60 percent. Trump “The administration is also likely to further reduce its business-friendliness and pressure from U.S. pharmaceutical companies on the BioSecure Act, making it unlikely that the law will be reinstated next year,” the analysts wrote. .
The tariffs could also have a negative impact on the medical technology sector, increasing the prices of medical supplies and equipment as well as the costs of related surgeries and other medical procedures, leading to higher insurance premiums. There is a possibility that
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