Pharma need not worry too much about President Obama

While traditionally the pharmaceutical industry has been worried when a Democrat is in the White House, Barack Obama's victory is unlikely to cause much concern.

Indeed, reports over the past months have suggested a strong leftwing shift by pharma towards President-elect Obama, with the industry giving the Democrats 49% of their $20 million in contributions for the 2008 election – up 15% compared with previous elections, which have shown a stronger Republican leaning, figures from the New York Times show. Donations to both parties are relatively equal for the first time since 1990.

During the campaign, both Obama and John McCain agreed generics should have a larger role in treatment options, should be made more available faster and included in trade agreements with developing countries. They also supported government negotiation of medications included in Medicare plans as well as re-importation and price controls.

However, Obama has said he will “take on the drug and insurance companies and hold them accountable for the prices they charge and the harm they cause”. According to the Boston Consulting Group, Obama’s healthcare plan involving government negotiation of Medicare drug prices might see up to $30 billion slashed from industry revenues, while private insurers will also demand price cuts. He also wants to expand healthcare benefits to the uninsured.

Nevertheless, the mood among analysts this morning is that Obama will need to tackle the economic crisis before any widescale changes in healthcare will be looked at. Reuters quotes Jason Zhang at BMO Capital Markets as saying that "overall, drug price control through Medicare under Obama could be perceived negatively, but practically it will be hard to implement" .

Charles Duncan, an analyst at JMP Securities, said that "for the pharma and biotech sectors, we believe that an increasingly cost-constrained healthcare market is going to favour those companies that can efficiently develop and market innovative products for which a real value-for-money argument can be made". He added that the situation will favour the biotechs.