Donald Trump’s presidential victory, in combination with Republicans maintaining control of Congress, reinforces the central role that legislative and regulatory event risk play for certain segments of the U.S. corporate healthcare industry, according to a press release from Fitch Ratings.
Trump has stated his intention to dismantle the Affordable Care Act (ACA). But beyond that, the extent to which the President-elect’s policies will coincide with traditional Republican policies, given the limited number of his detailed and articulated positions at this time, remains to be seen, the press release notes.
Successful efforts to repeal or materially replace the ACA would be a credit negative for healthcare providers as it is contributing to higher volumes of insured patients. Taken at face value, this would also be modestly negative for the pharmaceutical industry should fewer patients retain prescription coverage.
The drug pricing debate is likely to continue, though a Trump presidency will probably mean fewer headwinds for the industry than a Clinton presidency would have, given he did not focus on the issue to the same degree. Nevertheless, pharmaceutical manufacturers will continue to face pressure from payers, prescribers and patients to develop innovative drugs that demonstrate improved clinical outcomes and associated economic benefits, regardless of which political party controls the presidency, Senate and House.
The degree to which any policy proposals are realized is further clouded by the power retained by Democrats. Regardless, uncertainty heightened by the election’s surprise to the market and the aforementioned lack of policy details could influence companies’ business development and capital decisions over the short-term. Longer term implications could include incentivizing US corporations to repatriate offshore cash and lower tax rates may be credit positives while exclusionary trade policies may be negative.
Over the longer-term, healthcare companies will continue to invest in growth opportunities, as the fundamental outlook for the U.S. corporate healthcare industry remains positive despite the election outcome. Prospects for organic demand growth are supported by demographic shifts and growing demand in emerging markets. A repeal of the ACA may slow the nascent evolution toward value-based reimbursement schemes, but Fitch believes the shift toward linking pricing to patient outcomes will continue as patients and health insurers grapple with the growing burden of healthcare costs over the longer term.