Two of Europe's biggest drugmakers warned on Tuesday there would be no let up in pressure on US medicine prices after presidential election win for Republican Donald Trump, which sent pharmaceutical and biotech shares soaring.
Mergers and acquisitions (M&A) in the sector, meanwhile, could get a big boost if Trump pushes through plans for a US "tax holiday" on repatriated overseas profits, executives said.
Both France's Sanofi and Britain's GlaxoSmithKline have recent direct experience of US pricing pressure, with healthcare providers forcing big discounts for their top-selling diabetes and respiratory medicines.
In the run-up to the US election, investors had focused on the threat of price controls posed by Democrat Hillary Clinton, yet Trump also advocated a new role for government agencies in negotiating down drug costs.
"I don't think the pricing debate is over," Sanofi Chief Executive Olivier Brandicourt told an industry conference.
Drugmakers are already having to work much harder to justify US prices due to the rising power of US pharmacy benefit managers (PBMs), which administer drug benefits and negotiate rebates for employers and health plans.
The buying power of these middlemen has been brought to bear particularly in areas of medicine where there are several similar treatments to choose from, such as insulin injections and inhalers for asthma and chronic lung disease.
OVERSEAS CASH
The trend towards big buyers squeezing prices is only going to accelerate as the US healthcare system struggles to find the resources to pay for new medical interventions, GSK CEO Andrew Witty said.
"It doesn't really matter too much who won the US election because the direction of travel of the US marketplace, owned not by one stakeholder in the White House but by multiple stakeholders in public and private decision-making environments, is already set," he told the Financial Times meeting. Manufacturers contend that the discounts extracted by PBMs are not always passed on to patients.
"We are making significant concessions but patients are paying more," said Brandicourt, who believes legislation may eventually be needed to ensure patients gain from the discounts.
Another key question for investors is the potential for a further wave of deal-making in the healthcare sector, given impetus by Trump's plan to work with Congress to allow US firms to pay a lower tax rate when bringing back overseas cash.
That would add tens of billions of dollars in firepower for pharma and biotech acquisitions, with deal-hungry Pfizer alone having more than $80 billion it wants to repatriate. "I think there is likely to be quite a lot of M&A next year," said GSK's head of strategy David Redfern. "The only thing unclear is how big it gets.
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