Biopharma industry eyes 2025 bounceback, grapples with uncertainty over Trump return

The pharma industry faced its biggest regulatory change in decades with the Biden Administration's Inflation Reduction Act of 2022, which allowed the federal government's Medicare health plan for the first time to negotiate prices for its costliest prescription drugs.

"Nothing kills investment like uncertainty. The IRA led to a lot of uncertainty in the sector," Steve Ubl, head of industry lobbying group PhRMA, said at the JP Morgan Healthcare Conference this week in San Francisco.

PhRMA is hopeful the new administration will be less focused on "attacks to the ecosystem" of the industry and instead seek to reduce inefficiencies that would lower costs for patients, he said.

Prices for the first 10 Medicare-negotiated drugs were released last August, with the results largely in line with existing prices after discounts and rebates.

Names of the next 15 drugs up for price talks are due by 1 February and could be announced this week, although it is also possible that the final list could change after Trump takes office on 20 January.

Last year, the Nasdaq Biotechnology Index fell 3%, compared with a gain of 23% for the bellwether S&P 500 and a jump of nearly 29% for the tech-laden Nasdaq. The NYSE Arca Pharmaceutical Index rose 1%.

The discrepancies came despite all-time stock price highs hit by obesity drug manufacturers Novo Nordisk and Eli Lilly. Lilly ended 2024 with a gain of 31%, while shares of Novo, which posted underwhelming trial results for a next-generation weight-loss drug, fell 9%.

"Growth has been uneven across the sector. There are haves and have nots" as investors assess how drugmakers cope with looming patent expirations, said Roel Van den Akker, pharma deals leader at PwC.

Patent expirations

Morgan Stanley estimates that around $175-billion of 2025 US large-cap biopharma revenue – 35% of the total – will go off patent by the end of the decade.

To replace that revenue drugmakers need new products, either from their own research or by acquiring companies with promising assets, but those transactions slowed significantly last year.

The value of life sciences mergers and acquisitions totaled around $80-billion in the year through November, less than half of 2023's total, according to the Iqvia Institute for Human Data Science. No deals over $5-billion closed last year.

The expectation that the next chair of the Federal Trade Commission will be more deal-friendly than Lina Khan has been is viewed as positive for drugmakers.

On Monday, a flurry of deals were announced including a $14.6-billion acquisition by Johnson & Johnson.

Trump nominated current Commissioner Andrew Ferguson to succeed Khan. Investors are less enthusiastic about some of Trump's other high-profile nominations to top positions in his next administration.

"RFK's views on vaccines could certainly impact some of the major pharmaceutical companies," said Foley Hoag partner Beth Neitzel, referring to Trump's pick to lead Health and Human Services, Robert F. Kennedy Jr, who has been an outspoken vaccine skeptic.

"I think the objective will also be to find common ground. Making America healthy is what we are all about," Biogen CEO BIIB.O Chris Viehbacher said in an interview during the conference.

Pharma execs to exert influence

Pfizer CEO Albert Bourla underscored the industry's uncertainty in his session at the conference with investors, but said on Monday he would try to influence the environment.

"There are several people that think, for our industry, the risks outweigh the opportunities. There are other people, among them myself, which they think that the opportunities outweigh the risks. I guess we will see," he said.

J&J CEO Joaquin Duato told investors "it's difficult for me to estimate what's going to happen," adding that he would be pushing policies with the Trump administration on innovation and access.

Investors are focused on the impact of government policy on drug prices, including any changes to the IRA that could affect how quickly individual medicines become eligible for Medicare price negotiations.

Those changes would be difficult to make because they are written into the law, said Priya Chandran, biopharmaceuticals sector leader at Boston Consulting Group.

"It is unlikely that anything is going to drastically change in the first year," she said.

Foley Hoag's Neitzel said reports of Trump's "warm and cordial" December dinner with pharmaceutical executives in Florida have led to some optimism.

However, "the pretty universal statements by both Trump and RFK in the past about drug pricing do not suggest that this incoming Trump administration is going to be helpful to the industry," she said.

(Reporting by Deena Beasley in Los Angeles; additional reporting by Bhanvi Satija in Bengaluru; Editing by Caroline Humer and Bill Berkrot)