Investors, relieved to have a clear-cut US election winner and fired up about the prospect of tax cuts and deregulation under a Donald Trump administration, have sent many US share prices zooming higher but not the pharmaceutical companies.
The expectation that Mr Trump will impose a 10% to 20% tariff across all imports is not a concern for US pharma companies — who have extensive manufacturing bases in Ireland — or the indigenous industry here.
Pharmaceuticals are generally not price sensitive and the industry is well versed in “transfer pricing’’ between its subsidiaries, lowering export prices to overcome any import tariff increase where necessary.
There are obviously implications in which jurisdiction profits will be declared but, again, licensing and intellectual property charges between subsidiaries are used very extensively in the pharma industry to minimise any profit tax exposure.
Crucially, the thing that keeps pharmaceutical executives awake at night is the Trump appointment to head up the healthcare portfolio. His last-minute embrace of Robert F Kennedy Jr during his victory speech, when he assured his supporters that the anti-vaccine activist was “going to help make America healthy again”, has shattered the confidence of many in the industry.
An unconventional US Food and Drug Administration (FDA) chief would be bad news for the pharma industry, in particular the concern that decisions will be made from an unscientific point of view, dictating what is a safe and effective drug, and what should be approved or rejected.
The Department of Health and Human Services (HHS) is the top health bureau in the US, overseeing the FDA, the Centers for Disease Control and Prevention, the National Institutes of Health, and the Centres for Medicare & Medicaid Services.
Pharma sceptic
Also, Mr Kennedy is a pharma sceptic and has promised to “end the corruption at the federal agencies”.
Some of his other comments and positions have been equally controversial, like recommending fluoride be removed from public water supplies, “sexual dysphoria” as a result of herbicides, damaging effects stemming from wifi, and a covid pandemic that may have been engineered to target specific ethnicities.
Healthcare shares fell broadly after Mr Kennedy’s appointment, with companies that make vaccines taking the brunt of the losses. Markets have been focused on his views on immunisations, sending down shares of vaccine makers such as Pfizer, BioNTech, Novavax, and Moderna.
Ireland, like a number of other countries, has relied on an open US market for the large chunks of export sales from its manufacturing facilities.
The US is the largest market globally for pharmaceuticals, worth an estimated €1.4tn. The US and Canada account for 49% of the market, well ahead of Europe, China, and Japan.
The global medicines market has experienced significant growth during the past decade, with Ireland benefiting to the tune of €40.9bn in exports sales in 2023, and forecast to reach €55.8bn this year, based on Central Statistics Office figures.
The implications of an erratic US regulatory body head and a president hellbent on bringing home manufacturing to the US could be quite catastrophic for what has been the bedrock of Ireland’s pharmaceutical industry and a major source of corporation tax receipts of recent years.
As Ireland heads to the polls in the next few weeks, foreign policy is unlikely to impact our general election results.
But those seeking election will quickly find they have to take it very seriously. Tactics used in the first round of the Trump presidency, such as flattery, distraction, and golf, which enabled us to muddle through without too much damage, may not work this second time around.