Former President Donald Trump’s return to the White House is certain to bring about changes across many facets of the healthcare sector — including reproductive care, federal insurance programs and prescription drugs.
Experts interviewed for this article, who include pharmaceutical executives and healthcare consultants, agree that the upcoming Trump administration is likely to shake things up in the prescription drug world, most notably in the areas of drug pricing, and research and development.
What effects could tariffs have on research and development?
On the campaign trail, Trump often spoke about his plan to impose tariffs on imported goods. In the past few months, he has discussed taxing all imported materials between 10-20% — and proposed a tariff of up to 25% for goods imported from Mexico and up to 60% on goods imported from China.
These proposed tariffs could raise drug development costs as well consumer prices, which may force some pharmaceutical companies to reassess their research and development budgets, according to Dave Latshaw, CEO of AI-powered drug development startup BioPhy and former lead AI scientist at Johnson & Johnson.
“With the drug development process, there is a huge reliance — at least to date — on importing materials from international trade partners — especially ingredients for formulation and raw materials for the development process,” he said. “Without a doubt, increasing the amount of tariffs that we have is going to significantly increase the prices that we have to pay for those things — and that’s going to translate to the increased cost of developing a single drug, which will likely have a downstream effect on increasing prices to patients.”
Since there will be a significant increase in the costs associated with bringing a new drug to market, drugmakers will likely reassess the various programs in their portfolios, Latshaw added.
In his view, pharmaceutical companies will have to “take a really close look” at their existing portfolios and “basically redo” their calculations of how expensive each drug development program will be to maintain. Larger, more established drugmakers “are going to be far better off” when it comes to weathering these financial challenges, Latshaw pointed out.
“Earlier stage biotechs are highly reliant on access to external capital, and their programs are longer term and higher risk. It’s going to be a really challenging environment for them,” he stated.
Large pharmaceutical companies already require promising clinical data from smaller biotechs as a prerequisite before engaging in partnerships with them. If capital becomes even more constrained, smaller companies will need to make sure they have even stronger clinical data to present to potential partners and investors, Latshaw remarked.
This will create a wider gap between biotech companies with strong candidates for drug development and companies with not-so-strong candidates, he said.
“If you think down the road here a little bit, if early-stage companies are developing programs and there are only a handful of very promising clinical candidates, that’s going to create a lot of competition for those strong drug development programs. There will be a lot of competition for partnering and acquisition amongst the large pharmaceutical companies,” Latshaw explained.
How might pharma M&A be impacted?
Business experts predict that the upcoming Trump administration will be conducive to greater M&A activity. Latshaw thinks this will be true for the pharmaceutical industry, resulting in larger, better-funded drug companies.
“Most of the M&A activity in the space has been driven either by late-stage biotechs that have promising clinical data, or the more recent trend around consolidation of artificial intelligence-driven companies. My expectation is that both of those will likely continue and potentially accelerate,” he said.
Over the next few years, startups focusing on AI-driven drug discovery will likely come to realize that they can’t accomplish their goals on their own, given many are in need of larger datasets and more developed tech infrastructures, he pointed out.
That would in turn fuel M&A as these companies become acquisition targets for large drugmakers, Latshaw noted. But these acquisitions would likely be very competitive as acquirers will have to pay more to buy innovative biotech companies.
“Economic headwinds make it such that large pharmaceutical companies have the power — they have the balance sheet, and they have the stability to pick and choose as they want. There is likely only going to be a small number of companies that are, in their eyes, worth taking a look at — so there’s going to be a lot of competition and probably a good amount of premium that needs to be paid for those acquisitions,” he declared.
What happens next with the Inflation Reduction Act?
It looks likely that Republicans will control both chambers of Congress come January. Should Republican lawmakers take control, they will likely introduce a “big reconciliation package next year that may very well include changes to the [Inflation Reduction Act] government negotiation policy,” said Lindsay Bealor Greenleaf, head of federal and state policy at consulting firm ADVI Health.
The Inflation Reduction Act, passed in 2022, enables Medicare to negotiate drug prices directly with pharmaceutical companies for certain high-cost prescription medications — with the goal of decreasing costs for patients and reducing federal healthcare spending. In August, the Centers for Medicare & Medicaid Services announced that prices for 10 prescription drugs will be reduced for Medicare Part D recipients beginning in 2026. The next cycle of drugs up for price negotiation, which will include 15 medications this time, is slated to be released by February 1, with negotiated prices taking effect in 2027.
It’s uncertain what changes a Republican-controlled Congress will make to the Inflation Reduction Act. Greenleaf thinks that Republican lawmakers may decide to repeal its drug pricing revisions altogether.
Many Republicans oppose the Inflation Reduction Act’s drug price negotiation policy on the grounds that it could stifle innovation in the pharmaceutical sector by reducing potential revenue, she noted.
Short of an outright appeal, Republicans could be successful in passing the Orphan Cures Act, which seeks to incentivize drugmakers to develop treatments for rare diseases by extending exclusivity periods and giving additional tax credits to support research and development, Greenleaf said.
“Taking Congress out of it for a minute, let’s just think about how a Trump-led CMS might implement today’s Inflation Reduction Act government negotiation policy. That implementation could look different than what we’ve had under President Biden so far. You would imagine that a Republican administration may look at the policy in a less punitive way — generally speaking, a Republican administration may end up setting prices much closer to the price ceiling than a Democrat-led administration,” she explained.
Republican lawmakers are “typically much more sympathetic” to the idea that government pricing controls may result in fewer drugs coming to market, Greenleaf noted.
What about PBM reform?
While pharmaceutical manufacturers may catch a break from a Trump-led Republican administration, when it comes to drug prices, PBMs will still be a target. Lawmakers have been cracking down on pharmacy benefit managers in the past couple years.
Two years after launching an investigation into these prescription drug middlemen, the Federal Trade Commission released an interim report this summer outlining just how concentrated the PBM market has become. It showed that the six largest PBMs — CVS Caremark, Express Scripts, Optum Rx, Humana Pharmacy Solutions, MedImpact and Prime Therapeutics — manage nearly 95% of all prescriptions filled in the U.S. In September, the FTC sued three of the nation’s largest PBMs — Caremark Rx, Express Scripts and OptumRx — over insulin prices.
The FTC’s ability to continue its battle against PBMs is largely dependent on whether Trump will extend the stay of FTC Chair Lina Khan, pointed out Michael Abrams, managing partner of Numerof & Associates. In his view, Trump likely will replace Khan with another leader.
There are also several bipartisan efforts moving through both the House and Senate to increase transparency among PBMs, as well as de-link PBM compensation from drugs’ policies Medicare list prices, Greenleaf pointed out.
In her view, there is a good chance that Congress may pass some of these measures in the lame-duck period — and she expects PBM reform activity to continue into Trump’s presidency as well.
“I would imagine, given his opportunity with the second term, that Trump is going to want to finish the fight with PBMs. He was very focused on them in his first term,” Greenleaf declared.
During his first presidential term, Trump tried to implement the OIG (Office of Inspector General) rebate rule, she noted. The policy sought to reduce out-of-pocket drug costs for Medicare beneficiaries by eliminating rebates paid by drugmakers to PBMs, instead passing those discounts directly to patients at the pharmacy counter, she explained.
The policy didn’t pass during Trump’s first term, so he will likely view this effort as “unfinished business,” Greenleaf said.
Could the future be bright for psychedelics?
Researchers working to prove the therapeutic value of psychedelics have faced challenges this year — but the future may be brighter under the incoming Trump administration.
“In the past two weeks, psychedelics — and MDMA specifically — were cited by Vice President-Elect JD Vance, by potential HHS nominee RFK Jr. and other high-ranking Trump-adjacent figures as a priority for the new administration and FDA. More than that, there is a strong bipartisan push for médicalisation of these molecules and several people in both the House and the Senate on the Republican side who are in favor,” said Nick Kadysh, CEO of PharmAla Biotech, a biotech company focused on MDMA.
Trump has promised that Robert F. Kennedy Jr., who ended his own independent presidential campaign earlier this year, will have a “very big role” in healthcare. Kennedy has written on social media that he wants to reverse the federal government’s “aggressive suppression of psychedelics.”
Vance expressed support for greater psychedelic research last month during an appearance on the Joe Rogan Experience, the most listened-to podcast in the U.S.
“You can definitely still study whether this helps people or not. Why aren’t we doing that?” Vance said of psychedelic treatments.
Overall, experts agree that there is an abundance of uncertainties when it comes to the future of prescription drugs under the upcoming Trump administration. Future policies are highly dependent on who Trump selects to lead government agencies like CMS and the FDA, as well as what issues will be prioritized by the new Congress members.
Photo: Alex Wong, Getty Images
