Federal policy changes spell turmoil for biopharma

Since President Donald J. Trump took office a second time on Jan. 20, leaders across the biotechnology and pharmaceutical industry have by and large tried to play it safe with the new administration.

There's plenty at stake: drug-pricing policy, manufacturing, tariffs and other trade agreements, and how the US Food and Drug Administration is likely to approach new drug approvals, among other things. Industry leaders told C&EN in conversations between Trump’s election and inauguration that they wanted to work with the president and his various appointees.

Then came wrench after wrench in the works. Trump appointed Robert F. Kennedy Jr.—a longtime pusher of misinformation about vaccines—to lead the Department of Health and Human Services (HHS). In short order, the HHS underwent a massive reorganization that involved cuts to parts of the FDA that are responsible for ensuring the safety and efficacy of pharmaceuticals. Veteran leaders left the agency, including Peter Marks, director of the Center for Biologics Evaluation and Research, who was broadly seen as an ally of the pharmaceutical industry.

Meanwhile, federal agencies terminated grants and issued stop-work orders for projects that would, in normal times, feed the scientific ecosystem. Most recently, Trump issued an executive order that would overhaul drug pricing in the US.

“With the Trump administration, there’s so many different things all at once,” says Zach Weinberg, CEO of the early-stage biotechnology investment firm Curie.Bio. “Come next week, I’m sure there’ll be a whole new set of facts.”

The industry has found itself in new territory. And the biopharmaceutical sector does not do well with uncertainty, leading some leaders to take a more pointed approach in telling the administration what it needs to keep functioning.

“People are starting to brace for the worst,” says Pitchbook analyst Kazi Helal.

An evolving relationship

Shortly after Trump’s election in November, biopharma executives made efforts to court the new administration. The chief executives of Pfizer, Eli Lilly and Company, and the trade organization Pharmaceutical Research and Manufacturers of America (PhRMA) traveled to dine with Trump and Kennedy at Mar-a-Lago in December, as first reported by Axios. Pfizer CEO Albert Bourla had a second visit to Mar-a-Lago in January just before Trump’s inauguration.

Publicly, executives say they want to work with the White House, and some of the industry’s recent actions demonstrate that. When Trump first announced a plan to enact steep tariffs and reshore manufacturing, large pharmaceutical firms committed billions of dollars to building biomanufacturing facilities in the US.

“It's important for us to partner with the administration and with the government, and we plan to do it in this process, to make sure that we have enough manufacturing capacity here in the US to be able to address multiple scenarios,” Johnson & Johnson CEO Joaquin Duato told investors on an earnings call last month.

“We want to be deferential to the administration,” chief financial officer Joseph Wolk added on the call.

But it’s become clear that industry executives don’t wholly subscribe to Trump’s choices. Lilly CEO David Ricks told investors on his company’s first-quarter earnings call that he and his management team “don’t believe tariffs are the right mechanism” to increase domestic investment. Likewise, the trade group Biotechnology Innovation Organization (BIO) warned that tariffs would “stall medical innovation” and “create red tape.”

On the whole, new policies from the White House have been a mixed bag.

A sweeping executive order on prescription drug prices April 15 had a few items in the drug industry’s favor: Trump indicated support for abolishing the so-called pill penalty in the Inflation Reduction Act (IRA)—a feature that allows Medicare to begin negotiating prices for small molecules 4 years earlier than for biologics. Executives and investors have argued for years that the provision disincentivizes small-molecule development. The order also directs the FDA to find ways to speed up drug approval and instructs the secretary of the Department of Labor to make the pricing practices of pharmacy benefit managers more transparent.

But other parts of that order were less industry friendly. Trump said that his administration would “improve” on the savings under the IRA’s Medicare price negotiation program, make it easier for states to import drugs from Canada, and “reduce anti-competitive behavior from pharmaceutical manufacturers.”

A month later, Trump delivered an even bigger blow to drugmakers with a May 12 executive order that called for the institution of a “most-favored-nation” drug-pricing policy. It would tie Medicare drug prices to prices paid for drugs in other high-income countries, effectively lowering US prices across the board. The rule was widely expected, and it may not stand. Trump attempted to enact a similar policy during his first presidency, but several drugmakers sued. The result was a nationwide injunction and the policy’s eventual rescission.

Still, industry leaders are not happy that the idea has reappeared.

“Foreign price controls are basically set by faulty and outdated health economics,” says Peter Rubin, a former lobbyist and policy consultant who now serves as executive director of the pro-industry nonprofit think tank No Patient Left Behind. The organization has published a number of reports arguing that most-favored-nation pricing would undermine medical innovation in the US.

“Applying other countries’ antiquated approach to how they value—and pay—for medicines will stall investment across America’s biotech companies, risk access to vital treatments and cures for millions of American patients, and lead to fewer American jobs,” BIO CEO John Crowley says in a statement.

Cloudy futures

The drug-pricing order is the most direct hit to the drug industry since Trump took office. But it follows a slew of other changes that have left executives and investors struggling to figure out their next moves.

“There’s a lot of uncertainty, whether related to tariffs, a potential economic downturn, or restructuring at the FDA and HHS,” Bristol Myers Squibb CEO Christopher Boerner told investors during his company’s first-quarter earnings call on April 24.

As Curie’s Weinberg puts it: “Uncertainty is a killer of great ideas.”

“Clarity is better,” Weinberg says. “You need to know the rules of the game you’re playing. Any time you write a check or make a bet, you’re trying to know the future.”

The HHS announced in March that it would reduce headcount from about 82,000 employees to 62,000, including about 3,500 FDA staffers. Most of those jobs were meant to be in operations and administration, not in food and drug review and inspections, but it hasn’t played out that way. Budget cuts already appear to have delayed a handful of drug reviews and stopped certain safety monitoring programs.

No Patient Left Behind published an open letter last month warning about these exact pitfalls. “Such cuts will threaten and delay the approval of new medicines, diagnostics and devices, jeopardize the safety of our food supply and animal products (medicines and feed), leave us ill-prepared to address emerging health issues, and risk the safety and quality of everyday products like cosmetics, dietary supplements and over-the-counter medicines,” reads the letter, which 18 biotech executives and investors had signed as of May 15. “FDA’s staffing is still not nearly commensurate with the level required to support the careful review of the pipeline of new innovative treatments in development.”

Rubin sees the letter as an attempt to work with the administration. “My view is, in these volatile environments, the best thing you can do is try and control your own destiny by being explicit about who you are and what you want to achieve,” he says.

Meanwhile, cuts to the National Institutes of Health (NIH)—both to its workforce, reduced by about 1,200 people in the HHS reorganization, and to its grant funding—have investors worried about trickle-down effects. The NIH is historically responsible for funding basic science, which can in turn help researchers understand more about a disease or a potential treatment and fuel medical innovation. The agency and the funds it provides also propel the careers of junior scientists.

The R&D and talent pipelines are both under threat, says Pitchbook’s Helal. He thinks that the upheaval will only deepen the haves-and-have-nots situation already playing out in private industry.

“It’s a Hunger Games type of development we’re watching,” Helal says. “The winners will get bigger, and the losers will get the boot.”