What Does Donald Trump's Victory Mean for the Biotechnology Industry?

Daniel Domínguez Gómez

November 11, 2016

Original opinion article published in LinkedIn Pulse

Some experts believe Donald Trump's victory in the U.S. presidential election could benefit the pharmaceutical and biotechnology sector, especially given that Republicans will control both chambers of Congress. However, this alone is not enough to assume the biotech industry will have a clear path over the next four years.

In September 2015, Turing Pharmaceuticals, led by Martin Shkreli, sparked massive controversy by raising the price of Daraprim, a 60-year-old drug used to treat toxoplasmosis and by HIV patients, by 5,000%. Overnight, the drug's price jumped from $13.50 to $750 per dose, generating outrage among patients and triggering intense criticism of the pharmaceutical and biotech industries.

Amid the controversy, Hillary Clinton pledged to take action and establish stricter controls on specialty drug pricing. A single tweet created instability and uncertainty in the biotech sector, as investors feared a Clinton victory would bring regulatory restrictions that could threaten returns on new drug development investments. Within hours, the NASDAQ Biotechnology Index, composed of 144 members, dropped 4.7% and continued falling, ultimately declining 27% over the following year.

A year later, the biotech sector showed relief with Republican Donald Trump's election victory. Hours after the announcement, the index gained 8.9%, its largest recovery in months.

This market reaction may owe more to Clinton's defeat than Trump's victory, as the Republican made no mention of biotechnology during his campaign. This leads us to ask:

What does Donald Trump's victory mean for the biotechnology industry?

The answer is simple and similar to expectations for other sectors: uncertainty.

Trump administration decisions will directly impact the global biotech industry's future, as the United States is the world leader and primary driver of the sector. Within its borders emerge much of the industry's innovation, most investments in new developments are concentrated, and the most important market for pharmaceutical and agricultural biotechnology is located.

To understand the implications of the controversial magnate's victory for the industry, we must analyze his campaign and potential policies across five areas: international trade, immigration, agriculture, healthcare, and science and technology.

1. International Trade Policies

During his campaign, Trump promised to renegotiate or even dissolve international trade agreements such as the North American Free Trade Agreement (NAFTA) and the Trans-Pacific Partnership (TPP). This could create a hostile environment with new tariff barriers and export obstacles to the United States, undoubtedly affecting European and Asian biotech companies that have the U.S. as their main market, as well as U.S. export companies.

As Evelyn Warnes notes, this will be particularly sensitive for European companies, as Trump's surprising victory adds to the uncertainty generated by Brexit regarding trade between the European Union and the United Kingdom.

In this regard, major agricultural and pharmaceutical sector entrepreneurs are expected to defend their interests against any treaty renegotiations Trump's government decides to pursue. Drastic policy adoption in the first years of his administration seems unlikely; nevertheless, the industry must prepare to face new trade barriers with the United States.

Mexico will face a particular situation, as it depends heavily on importing biotechnology products (across all areas) from the United States. A protectionist policy and eventual NAFTA condition hardening could generate price increases for imported products, especially pharmaceuticals and food, directly affecting residents' economy and healthcare sector stability.

In 2015, Mexico imported 11.9 million tons of corn—the basis of its diet—from its northern neighbor, nearly a third of local corn consumption and equivalent to $2.085 billion in spending. Adding the peso's depreciation against the dollar in recent months and the government-imposed moratorium on adopting genetically modified organisms that could increase Mexican corn yields, Mexico likely faces a severe food sovereignty problem in coming years.

Additionally, a significant portion of biopharmaceuticals consumed in Mexico's public and private sectors come from the U.S. In 2015, pharmaceutical product imports reached $4.804 billion according to Banco de México, so price increases could worsen the medicine procurement crisis in the health sector.

Considering this situation, it is essential that the Mexican government and private sector take immediate measures to boost industry growth through innovation and technology.

2. Immigration Policies

Immigration was one of Trump's campaign's core and most controversial topics. Despite the Republican's fervent nationalist rhetoric, the United States has clearly benefited from migrants' contributions to technological industries.

If the Trump administration imposes stricter immigration policies, the number of foreign graduate students and specialized professionals residing in the U.S. will likely be dramatically reduced—a situation that would significantly affect a U.S. biotech industry with intensive requirements for highly trained human resources. According to Vivek Wadhwa's analysis, 20.1% of biological sciences companies in the United States were founded by immigrants.

We must also mention the negative effect this would have on the academic/research sector, which benefits from the "brain gain" of foreigners primarily from Asia, Latin America, and Europe.

The agricultural sector would also be affected in the hypothetical case of mass deportation of the migrant workforce that plays a fundamental role in U.S. agriculture.

Mexico will undoubtedly be among those most affected by Trump administration immigration policies, especially if he makes good on promises to deport 11 million undocumented migrants and build a wall on the southern border. In biotechnology specifically, the negative effect would be seen in fewer Mexicans trained at prestigious U.S. universities and consequently diminished scientific/academic collaborations between both countries. However, this also represents an opportunity to reduce "brain drain" and capitalize on possible Mexican talent return in research and biotech company generation with appropriate policy adoption.

3. Agricultural Policies

Donald Trump did not present a single concrete agricultural sector initiative during his campaign, so the direction his government will take regarding agricultural biotechnology is unknown. Various analysts consider it unlikely that the Republican government will propose greater regulatory obstacles for GMOs in terms of labeling and approval of new events, as the president-elect has shown support for free agriculture.

For now, the only signal he has given on agricultural topics is announcing a panel of 65 agricultural specialist advisors, including prominent entrepreneurs and legislators who have supported agrobiotechnology, though also including opinion leaders in organic agriculture and healthy foods—sectors that have opposed GMOs despite scientific consensus.

Although the outlook presented by subject matter experts seems positive, Trump's persistent anti-scientific attitude generates some concern in the field, as early in his campaign he published a tweet referencing his rival Ben Carson's Iowa leadership asking whether "Too much Monsanto in corn causes brain problems."

Democrats will play an important role in this topic, especially with a possible emergence of Bernie Sanders as opposition leader—one of agrobiotechnology's main detractors in the U.S.

4. Healthcare Sector Policies

The president-elect's only visible health topic proposal is repealing Obamacare and replacing it with another program whose details are unknown. Specialists estimate Republicans will not promote policies contrary to pharmaceutical/biotech industry interests in terms of price controls or regulatory barriers.

While opposition can generate great pressure on health topics, discussion in the first years is unlikely to focus on issues beyond the Affordable Care Act—one of Barack Obama administration's great pillars—unless new abuses like the mentioned Turing and Daraprim case emerge. Therefore, sector investors can rest easy; everything indicates Donald Trump will not try to kill the "Golden Goose."

On the other hand, among rumors about possible presidential cabinet formation, Ben Carson's name has gained strength as possible Secretary of the Department of Health and Human Services (HHS). Dr. Carson is a renowned retired neurosurgeon and contender during early stages of internal Republican elections to choose the U.S. presidential candidate. His appointment might seem appropriate; however, Carson has publicly shown his anti-vaccine and anti-science position, which may represent a threat to certain industry sectors and residents' health.

5. Investment in Technological Development and Trump's Attitude Toward Science

This is where the greatest concerns about Trump's government lie. Some opinion leaders consider Donald Trump the "most anti-scientific president in history," and they may be right.

The new president's anti-scientific attitude is accentuated by the creationist and anti-evolutionist position of a numerous Republican party sector, strongly represented in the new administration by Vice President-elect Mike Pence, who has repeatedly shown opposition to scientific consensus on climate change and criticized the Obama administration for supporting embryonic stem cell research.

Investment in scientific research has been a fundamental pillar for U.S. economic development. Democratic candidate Hillary Clinton included in her proposals an ambitious plan to increase funding for scientific activities and education in Science, Technology, Engineering, and Mathematics (STEM). However, Trump's campaign does not seem interested in strengthening this area; some analysts even believe an eventual tax cut would directly affect the budget dedicated to science and technology.

The scientific area receiving the greatest impact is climate change research and alternative energies. The outlook is highly concerning, as Trump has proposed eliminating the Environmental Protection Agency (EPA) and declared he does not believe in climate change, calling it a Chinese invention to weaken other countries' industries.

In September this year, a group of 375 scientists signed an open letter to American society expressing concern about Trump's position on climate change, as the New Yorker has declared his intention to withdraw U.S. support from the Paris Agreement. In this regard, it seems impossible that biofuels and environmental biotechnology research will receive a boost from the federal government.

In life sciences, research in stem cells, human gene editing, cloning, and gene therapy may be affected by Republicans' animosity toward these topics for religious reasons. Additionally, Trump has publicly declared his concern about the relationship between vaccines and autism several times, a myth widely refuted by the scientific community.

Scientists and academics' concern about science's future during Trump's government rests on the magnate's deep and absolute ignorance in scientific and technological topics, as well as his "lack of respect for science" as described in Scientific American's September editorial.

The Obama administration was notably active in science and technology; however, this new administration is highly unlikely to consider this area among its priorities, implying stagnation or, in the worst case, a setback and budget cuts for research and development.

What Can We Expect in Mexico?

Mexico could be the country most affected by Trump administration measures. From the beginning of his campaign, it was the target of insults and attacks. In immigration and trade matters, the industry will face new barriers that must be addressed with intelligence and unity.

While the future looks uncertain for Mexico, we should consider it an opportunity to promote development of knowledge-based industries, science and technology as our weapon to face a changing economic environment. In this regard, the biotech industry can emerge as the engine of a new Mexican economy, less dependent on oil and imports. It will be necessary to generate cohesion among academia, government, and industry to articulate the innovation system and trigger biotechnology growth in the country through research and entrepreneurship.

Conclusion

Compared to Clinton and the Democratic Party's stance, the outlook looks slightly more encouraging in regulatory and investment matters for agrobiotechnology and biopharmaceuticals. In contrast, the scientific sector, from basic research to technological development, looks severely threatened by Donald Trump and the Republican Party's ignorance and anti-scientific attitude. Additionally, protectionist or nationalist measures in immigration and trade will likely generate a hostile environment for innovation, playing completely against the biotech industry, relegating price control fears to second place and stagnating its development.

Given the uncertainty about Trump's behavior and temperament as president, we must be cautious about the industry's future. During the first year of his administration, we will be able to see the landscape more clearly and thus define appropriate strategies to face the challenges and opportunities before Trump's government and the changes it will bring to the global economy.

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