Rhenu Bhuller, partner at Frost & Sullivan, examines the evolving implications of the Trump election on the healthcare industry in Asia.
Despite global political uncertainties and a sluggish economic outlook, 2017 will be an amped-up year for the global healthcare industry that promises partial realisation of major health policies and initiatives. Frost & Sullivan projects that the total healthcare industry (covering pharmaceuticals, medical devices and imaging, in vitro diagnostics, patient monitoring and HCIT) will grow from US$1,652 billion in 2016 to US$1,732 billion in 2017, a growth rate of 4.8%. Future drugs and medical devices will be more targeted to meet the unique needs of emerging markets in regions like Asia and Latin America which demonstrate high growth opportunities compared to the sluggish developed markets in Europe or the US.
Donald Trump’s ascendancy to president of the US promises to bring big change for business. Controversial campaign rhetoric targeting topics as diverse as trade, deregulation, the environment, and healthcare coupled with Trump’s long list of unconventional government appointees has created an environment of uncertainty. Citizens, businesses, and governments around the world are trying to separate the hyperbolic from the probable by asking what policies Trump will actually pursue over the course of his presidential term and what preparations can be made.
The US economy is expected to strengthen on account of Donald Trump’s presidency. Rapid growth of factors such as personal disposable income, retail sales, and overall consumer confidence, supported by fall in unemployment and advances in manufacturing, is expected to continue in 2017 owing to the president’s focus on manufacturing and domestic demand driven US growth. Overall, Trump’s economic policies are expected to prompt average annual GDP growth to rise from 1.6% in 2016 to 3.5% in 2017, supported by the strengthening of sectors such as energy, manufacturing including chemicals and pharmaceuticals.
It is expected that the healthcare industry will be one of the industries that will see the strongest effect of a Trump presidency, where Trump’s healthcare plan is likely to be focused on lowering costs and driving competition. While the effect of Trump administration’s legislative actions will be experienced primarily by the US healthcare industry, global market participants and markets need to consider the trickle-down effect. Starting with mergers and acquisitions, this confluence of events is poised to make 2017 a banner year for vc investment in healthcare. The maturation of certain emerging technologies, combined with access to cash from a possible lowering of US corporate tax and repeal of the medical device excise, would lead to resurgence in funding for new healthcare technologies and drive mergers and acquisitions in the healthcare space as US companies seek to invest globally.
Under the Trump administration, there is a likelihood of possible restrictions on global trade and new tariffs or custom duties may be instated for healthcare manufacturers aiming to export their products to the US. This would drive up prices of imported products and negatively affecting supply chains for foreign drug manufacturers with operations in the US. Japanese pharmaceutical and medical device companies and Indian pharma companies for example could be faced with new challenges in the US, one of their largest markets and hence need to re-look at their US and global strategies to drive growth.
Trump also believes that the cost of care could be reduced to a great extent if Medicare negotiated with pharmaceutical companies. More power may be bestowed to Medicare to negotiate drug prices – leading to lower prices in the US. Public and political pressure to control surging drug prices in the US will compel health authorities to introduce transparency measures around drugs pricing, especially for some of the expensive diabetes and cholesterol medicines where more low-cost generic competition is gaining market acceptance. The lower prices combined with a possible decrease in the number of insured people in the US due to changes to the Affordable Care Act would increase the importance of other high growth markets such as those in Asia to pharmaceutical companies.
Last, but not least, would be the failure to pass the Trans Pacific Partnership in 2017 as presently constituted, putting on hold debates over its impact on health care and curtailing the incentive for authorities to reform their regulatory process. Representing approximately 40% of global GDP, the TPP would have linked the economies of the United States, Canada, Mexico, Peru, Chile, Brunei, Vietnam, Singapore, Malaysia, Japan, Australia, and New Zealand. Proponents argue that the United States will be left out of contributing to 21st-century global trade rules without this agreement. Because the TPP will not be implemented, implications can only be measured by lost benefits to select industries. The pharmaceutical industry would have benefitted from tighter IP laws and patent protection as it would have helped pharma to retain 12 year exclusivity and put a firewall against the back drop of extensive biologic patent expiries from 2017 to 2020. It is expected that the pricing environment in APAC will become more dynamic now as governments seek to introduce more measures to control spending while meeting the demand for specialty and high-value pharmaceuticals. This would ultimately drive the generics and biosimilar market in Asia Pacific as well.
Given the importance of healthcare, any corporate tax changes, regulatory and legislative activities, or incentives in the US will influence global markets. Trump’s presidency will likely have economic consequences for the US and global markets and shape this industry’s trajectory in next several months.