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Democrats regain control of House in mid-terms

Biotech and pharma share price indexes have climbed since the news broke

US

The results of the US mid-terms are mostly in, and the headline news is that the Republicans no longer have control of the House of Representatives, limiting President Trump’s ability to bring forward legislative plans including controversial healthcare proposals.

While an anticipated ‘blue wave’ of Democrat support didn’t really materialise at this half-way point in Trump’s first term, the party added more than the 23 seats needed for a majority in the House, although the Republicans tightened their grip on the Senate.

The bottom line is that Democrats can now block legislation they find unpalatable in the lower chamber, but Trump should have the support he needs in the Senate to shoot down bills he finds disagreeable and also push through executive and judicial appointments.

Biotech and pharmaceutical share price indexes have risen in the wake of the news, and likely on expectation that Trump may now find it difficult to push though proposals aimed at limiting medicine prices in the US which have been giving industry some sleepless nights.

That includes a plan to use a reference system based on other countries to set the prices of medicines in Medicare Part B – which left the industry aghast when it was announced last month – and proposals to do away with the current rebate system for medicines to prevent ‘middlemen’ taking a cut of a medicine’s price, and placing list prices in direct-to-consumer (DTC) drug advertising.

It’s worth noting that curbing medicine prices may be one area where the President can hope to garner some level of bipartisan support, although analysts at RBC Capital Markets said ahead of the midterms that a Democrat-controlled House and Republican Senate “will maintain the political stalemate status quo, making further implementation of Trump’s drug pricing blueprint more challenging, and this would be net positive for the sector”.

The split also means that repeal of President Obama’s Affordable Care Act and cuts to Medicaid – which provides healthcare to people on low incomes – are also less likely, they suggested. Healthcare was top of the agenda in the mid-terms along with immigration, according to exit polls.

While attacking Obamacare was a staple of Republican campaigning ahead of Trump’s 2016 victory and afterwards, the approach seems to have backfired in a number of key seats, including Kansas’ 3rd District for example, which saw two-time Republican incumbent Kevin Yoder ousted by Democrat Sharice Davids – one of two Native American women joining Congress for the first time this year – following a campaign dominated by the health agenda.

Meanwhile, with Democrats now more likely to launch long-threatened investigations into the president and his administration, the deadlock in government could be even more pronounced, although House Democratic leader Nancy Pelosi has pledged to pursue a bipartisan agenda in a country that has “had enough of division”.

One Senate seat of particular interest to the pharma industry is New Jersey, which was being contested by ex-Celgene chairman Bob Hugin for the Republicans. He was defeated by Democrat Bob Menendez after a closely-fought contest, even though Menendez was tried (but not convicted) on corruption charges last year.

Article by
Phil Taylor

7th November 2018

From: Regulatory

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