1. Deep blue scenario
In a scenario where Democrats gain the presidency and control 60 or more Senate seats could be the most onerous for the pharma industry, concluded UBS analyst Kevin Caliendo. In that scenario, Democrats are likely to pass legislation based on H.R. 3, also known as the Lower Drug Costs Now Act of 2019.
That legislation called for adopting international reference pricing for drugs for Medicare, slashing federal spending by $345 billion between 2023 and 2029, according to an estimate from the Congressional Budget Office (CBO). H.R. 3 would also allow private insurers to take advantage of Medicare’s drug price negotiations. It also caps out-of-pocket spending on prescription drugs for Medicare beneficiaries.
The legislation could also lead to a reduction in revenues that translates into diminished R&D investment, potentially slowing new drug development, CBO concluded. Fitch Ratings also concluded that the legislation would harm drug companies’ business model. House Speaker Nancy Pelosi, however, argued on her website that government savings from the bill would support research at the National Institutes of Health.
One factor that could insulate the pharma industry from sweeping changes is the goodwill it has garnered from the COVID-19 pandemic.