Given the Democratic sweep of the midterm elections, many are asking how this will impact the Pharma industry? While the Democratic party has gained the majority position in both the House of Representatives and the Senate, they lack the two thirds majority required to override a Presidential veto. This will slow, if not stop, the passage of any meaningful near-term new healthcare legislative reforms.
The Democratic congress has many large priorities to focus on including affordability, the minimum wage, the war in Iran, immigration, and future military aid to Israel. So, they will need to be selective in the actions they take in healthcare. Likely Democratic healthcare focus areas include:
The Democratic Party will reinvigorate their focus on previous healthcare policies including the reinstatement of Obama ACA subsidies and tax credits, the expansion and acceleration of Medicare drug-price negotiations, as well as new focal areas such as FDA schedules for vaccines, funding for mRNA-based vaccines, and reversing Trump cuts in Medicaid.
At the same time, the Dems will need to address fractures within their own party. The Democratic Socialist of America (DSA) gained five seats in the House. As DSA member Randy Villegas stated in his California acceptance speech, “when I get to Congress, I am not going there to do the bidding of any political party or leader.” Abul El-Sayed, winner of the Senate race in Michigan noted that the Democratic party “needed new leadership.” DSA gains, coupled with the reinstatement of Medicare for All proponents Senators Schumer and Wyden in leadership roles of the health and finance committees, will put pressure on the Democratic party to move healthcare reform beyond ACA and IRA. It is important to note that the Democratic majority in the House can still be achieved without the support of DSA members. While meaningful Medicare for All legislation is unlikely in the next two years, the DSA will ensure that Medicare for All will be a part of the Medicare reform debate moving forward and in shifting short term Democratic healthcare policy closer to Universal Healthcare.
The Democratic party is tightly aligned with health systems, as witnessed by the hospital stock gains after the mid-term elections. This will make it difficult for the Trump administration to finalize the proposed Part B 340B payment reforms designed to reduce 340B Part B payment rates from ASP+6% to ASP-33.4%, and the potential expansion of such reforms to Part D. While the Democratic party lacks the two thirds majority required to override a likely Trump veto on any legislation to stop CMS from implementing 340B payment reform, likely lawsuits from the American Hospital Association will effectively kill any such reforms by delaying their implementation until after the 2028 Presidential election.
While the MFN agreements between pharma manufacturers and the Trump administration are likely to remain in effect until 2029, the Dems are likely to initiate hearings and investigations designed to gain greater insights into the MFN agreements and exemptions which will in turn any slow progress on MFN.
The Dems are likely to use the investigative powers of Congress to not only initiate hearings on the release of the Epstein files, potential corporate corruption of the Trump administration, and potential abuses of ICE, but to also initiate rounds of congressional investigations and hearings of Pharma CEOs on drug pricing, with a focus on excessive new product launch pricing.
Continued bipartisan focus on the profiteering practices of the PBM industry and the enforcement of recent FTC settlements and newly passed PBM legislation.
For more insights into the impact of the Democratic sweep of the midterm election on the Pharma industry, readers should contact Michael Ryan.