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Executive Summary



Beyond pricing, industry experts weigh in on how the next administration has shifted expectations across a range of areas – including tax reform, FDA standards and the Cancer Moonshot Initiative.

 

The Trump Administration

 

Nobody has a crystal ball to show what life will be like in the biopharma world under the incoming Trump administration, but industry experts were willing to share some personal predictions during panels at the Biotech Showcase meeting in San Francisco, held in parallel with the J.P. Morgan Healthcare conference.

The panels took place on Jan. 10, the day before Donald Trump’s market roiling press conference where he advocated bidding for government drug purchases. (Also see "Trump Makes A Nasty News Day For Pharma – But What Will It Really Mean?" - Pink Sheet, 11 Jan, 2017.) Trump’s call for price negotiations was consistent with his campaign rhetoric but still seemed to catch industry by surprise – another sign that the watchword for his administration will be unpredictability (Also see "Trump’s Rx For The Drug Industry: Take Two And Have No Idea What Will Happen In The Morning" - Scrip, 12 Dec, 2016.).

 

Unpredictability is also seen in the Congressional drive to repeal and replace the Affordable Care Act (ACA), which might now become more a reform and rename effort that still leaves the future insurance status of millions of Americans currently served through President Obama's signature piece of legislation hard to predict. But biotech experts have more confidence about other changes like tax reform and a continued push toward greater innovation in the regulation and approval of drugs.

 

ACA … A Rose By Any Other Name

 

Congress may wind up deciding to have a health system that is just like Obamacare but goes by another name, because the pain of millions losing health insurance may simply be too great if it was repealed, according to Gregory Simon, executive director of the White House Cancer Moonshot Task Force.


The biosimilars approval program was created as part of the ACA and wholesale repeal would mean "it would go down the tubes," Jane Axelrad, principal at Axelrad Solutions and former associate director for policy at the FDA's Center for Drug Evaluation and Research, commented.

But many aspects of the ACA cannot be repealed without 60 votes in the Senate and this will slow the pace of change, Julie Gerberding, executive vice president and chief patient officer in global public policy and public health at Merck & Co. Inc. commented.


Bertram "Norm" Coleman, former Minnesota senator and attorney with Hogan Lovells, noted that change will happen as a vast number of Americans made a choice and elections have consequences. "I do think we will see very significant change and we will see how it plays out," he said.


Speaking at J.P. Morgan, outgoing Centers for Medicare & Medicaid (CMS) Administrator Andy Slavitt spoke out about the danger of repealing ACA without a plan to replace it, and stressed that at the minimum, a new plan must maintain coverage for those currently covered, ensure quality care, bend the cost curve and be fiscally responsible.

 

Tax Reform: How Far Will It Go?

 

Biotech Showcase panelists were optimistic about the prospects for tax reform. Companies are holding a lot of cash and would bring it back to the US if there was a tax holiday or if the 35% corporate tax rate was lowered substantially. (Also see "Pharma Is Ready And Waiting For A Tax Holiday Under Trump" - Pink Sheet, 9 Nov, 2016.) This might allow an acquisition spree that would stimulate the whole sector.

 

Gerberding said that she is hopeful for comprehensive tax reform and that resources will come back and be used where they are needed. The current tax laws create unnecessary complexity in biopharma business, she said.

 

"We manufacture things in places that might not be the most economically efficient over the long run because of the confusion and difficulties that we have with taxes. So hopefully that will be something that will happen and we can all look forward to getting behind," Gerberding said.

 

Coleman commented in an interview that he thinks there will be tax reform – because there is bipartisan support for it – the only question is how far it will go. Change could come quickly, perhaps in the first 100 days of the new administration, he added.

 

"There's something magical about the first 100-day period. That is what people will be shooting for," Coleman said.

 

Continued Change At FDA

 

Ex-FDA official Axelrad noted that the new administration is expected to want to spur innovation in the regulation of drugs and that reducing review times will take center stage. However, FDA has already been performing at historically high levels, and the 21st Century Cures Act, which was just signed into law in December, moves it further in this direction. (Also see "The Real Impact Of ‘Cures’: The Hype Means Something" - Pink Sheet, 15 Dec, 2016.)

 

The new administration may want to push the envelope even further than the new legislation, but it's unclear how far the agency will be willing to go, Axelrad said. If the administration looks to undermine the scientific rigor of the regulatory process, officials will not go along. It may be that the administration will come to appreciate the expertise of FDA officials after they interact with each other, and hopefully conflicts will be minimal, she added.

 

Merck's Gerberding commented that government was designed for "stability not agility" and that change happens very slowly even when there is demand for it to happen fast. Agencies are very stable and have partners and stakeholders in the real world who are capable of raising red flags when appropriate, she noted.

 

Axelrad also pointed out that the 21st Century Cures Act gave sweeping new hiring and pay authority to FDA, in response to high unmet need for new staff. In contrast, the Trump administration is expected to apply a government-wide hiring freeze, and it's unclear how that will affect plans at the agency.

 

Beware National Emergencies

 

Overall, Gerberding expressed optimism about the new administration. However, she said that one area she is personally most worried about in the transition period is preparedness for national emergencies – past problems include the flu pandemic, anthrax attacks and Ebola.

 

New administrations in both parties have a tendency to pull leadership to the center and over-promise, and take control over situations with people who really don't know what they are doing, she said.

 

"It would be naïve to think this president wasn't going to have to deal with some sort of bio-preparedness issue – whether its intentional or natural doesn't really matter. The apparatus the government needs to pull into action to manage it is complex and requires a fairly sophisticated understanding of how agencies and departments sh ould work together, and it takes a long time to develop that experience," Gerberding observed.

 

The administration should bring a good person on board to manage this, as lack of preparedness could derail the implementation of new policies, she suggested.

 

Moonshot No Murder Victim

 

Simon said he is frequently asked what will become of the Cancer Moonshot initiative, which was spearheaded by Obama’s Vice President Joe Biden. The Moonshot exec said that his office expires at the end of the Obama administration unless Trump decides to keep it going.

 

But Moonshot has "morphed from a program to a movement" and "private sector initiatives will continue regardless of whether there is a PO box in the White House that says 'Cancer Moonshot'," he said.

 

"We have provoked an enormous reaction of people wanting to things bigger and faster and better," Simon added.

 

Funding for the program of $1.8bn over seven years was allocated by a Republican Congress, and it's unlikely that someone will now "come in and kill it," he said. More likely it just will not be led from the White House.

 

Furthermore, Biden is starting his own cancer initiative as a nonprofit that will continue to convene people around Moonshot, he said. Biden unveiled the new initiative to the biotech community at the J.P. Morgan meeting Jan. 9.

 

SBIR Program Needs Allies

 

The Small Business Innovation Research (SBIR) program, which provides federal grants for research and development, may not necessarily be a winner under a Trump regime, panelists said. The basic program was reauthorized through 2022, but many pilot programs are set to expire at the end of the 2017 fiscal year, a National Institutes of Health employee in the Biotech Showcase audience pointed out.

 

Simon commented that there are "a lot of people who are pro-business who do not want government providing grants like this because they view it as deforming the market, not strengthening the market." Simon advised building support in Congress to keep the programs going.

 

Former-senator Coleman agreed that recruiting advocates in Congress would be helpful and said that it's sometimes good not to be known too well – as a relatively small program it may fly under the radar.

 

"You know what happens to a whale that spouts? They harpoon them. So if you have a small program not making a big splash but really making a difference, that is a real asset," he said.

 

CMS Innovation Center A Political Football

 

The CMS Innovation Center is a potential casualty of a Trump administration.

 

Expert panelists during a session on the CMS noted that the center under the Affordable Care Act has had "enormous discretion to test innovative payment and delivery system models," with seed money to implement new initiatives.

 

The idea is to experiment with various models with the goal of finding ways to decrease cost, exemplified by the failed proposal to reform Part B payment at the end of the Obama administration. (Also see "CMS Cancels Part B Demo Before HHS Secretary-Designate Price Does" - Pink Sheet, 16 Dec, 2016.)

 

Mandatory models have proven unpopular with many conservatives, including, notably, Trump's selection for Health & Human Services Secretary Tom Price (R-Ga.), and the center has become a political football, panelists suggested. Consequently, they expect that, at a minimum, mandatory models will be pulled back.

 

Despite pushback, stakeholders are very supportive of some initiatives and there is bipartisan recognition of the need for value-based payment methodologies, so there may be room for the center to persist in perhaps a different form in the future, panelists said.

 

"I would hate to see it go away. Republicans were not happy about how much authority it had, but now that the authority rests in their hands maybe they might see it a little bit differently," Liz Fowler, vice president of global health policy at Johnson & Johnson commented.

 


 

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