Changes to the USA Landscape: Trump and the Republican New America

As Donald Trump’s administration becomes more defined over the coming weeks, it is important to understand how his campaign promises will affect the policy landscape, as well as the implications of unified Republican control in Washington.  Although reforms that affect the USA landscape are likely, the nature and magnitude of their effect are unclear.  While changes are expected to come for the FDA in terms of regulatory timelines and structure, as well as beneficial tax reform and relief, the immediate objects of change are the Affordable Care Act and Medicare, though many of the details remain to be seen.

Affordable Care Act

While healthcare only became a visible issue late in the campaign, lambasting the Affordable Care Act was a winning strategy for Trump and other Republicans.  Several problems befell the law this year including the departure of major insurers from the exchanges, legal challenges from House Republicans on funding mechanisms, and some high-profile Democrats turning from advocates to critics of the legislation.  The culminating event was the release of the 2017 premium increases, which averaged 25% but were much higher in some states (including 116% in Arizona).  Repealing and replacing has been a top Republican priority since 2010, and with Trump in the Oval Office they finally have an opportunity to act.

There are several competing replacement plans from across the party and think-tank space. To effectively compare the competing plans, a performance baseline is required.  In a recent speech, President Obama outlined the metrics that a replacement system would likely be measured against, “After they’ve replaced the ACA with their own plan, [if] 25 million people have health insurance and it’s cheaper and better and running smoothly, I’ll be the first one to say, ‘That’s great!’”.  Translated to fundamentals, critics of the replacement will be watching the uninsured rate, inflation of healthcare costs, and coverage-satisfaction rates.  Since passage of the ACA, the uninsured rate has fallen to 8.6%, healthcare costs have grown less than 3% annually, and 77% of those receiving coverage through the exchanges said they were ‘satisfied’ with their plans, leaving a high bar for any new system.

Against these standards, the coterie of GOP solutions offer a mix of market-oriented policies and decentralised funding and decision-making that could deliver on all three points.  The final plan will likely be some melded form of Trump’s own plan listed on, Paul Ryan’s Better Way plan, and elements of proposals from conservative think tanks.  Some combination of expanded Health Savings Accounts, converting Medicaid to block-grants, and capping the tax exclusion for employer-sponsored coverage.  While Health Savings Accounts are heralded as potentially bending the cost-curve, the mechanism for this shift is increasing patient exposure to costs.  Without the protection of actual insurance coverage, patients will face the full costs of their medications with tax-advantaged funds of their own.  Block-grants for Medicaid will restore choice and customisation by state governments, however it could reduce the overall Medicaid budget by as much as one third, which likely would entail more restrictive pharmaceutical access for this patient population.  Finally, the tax-exempt status of health insurance has long been a way for employers to provide generous benefits beyond salaries.  Coverage through employer-sponsored plans is generally more generous than what individuals would purchase independently, with lower copays and deductibles.  Opposition to this kind of reform was demonstrated by resistance to the Cadillac Tax, which would have applied a similar surcharge on employers providing high-end insurance plans.

The details of the final plan still require a great deal of refinement, but given the proposals so far it seems that the general effect could be a rise in the share of pharmaceutical costs coming out of pocket for patients.  For more on how these policies could affect access, please see our coverage from earlier in the campaign.


One unusual aspect of the Trump campaign was his willingness to buck Republican orthodoxy, and Medicare was no exception.  While leaders like Paul Ryan have long advocated a modernisation, or even ‘voucherisation’ of Medicare, Donald Trump said repeatedly on the trail that he would leave it unchanged. More specifically, he advocated using the purchasing power of the program to negotiate directly on pharmaceutical costs, even though the Republican-driven Medicare Part D program explicitly forbids the government from interfering with price negotiations. The tension between the president-elect and his party in Congress could delay progress on this issue, as his willingness to compromise on campaign promises will be put to the test.

The first prong of Medicare reform – “modernisation” in the Republican lexicon – has not yet been defined in full by Ryan and his team. The only specifics detailed in their Better Way plan were tied to a repeal of the ACA, including disbanding the Independent Payment Advisory Board and restoring pre-ACA payment rates across the board. The second prong of reform – converting the program to vouchers enabling retirees to be reimbursed for the purchase of private, competing plans – could produce greater competition on pricing among insurers.  Tracking these details as they evolve will be important to understand how a reformed Medicare would alter the pharmaceutical access landscape, but Medicare is likely to take a back seat until the repeal and replace movement is completed.

The one aspect that Trump has not backed down from is Medicare price negotiation. As the author of The Art of the Deal, he frequently described his intent to put his negotiating prowess to work for the American people to reduce the costs paid for pharmaceuticals.  Unlike some of Trump’s more unusual policy proposals, negotiating drug prices has global precedent, however it is difficult to discern how it would manifest.  It seems most likely that some body would be formed within the FDA or Department of Health and Human Services, representing all Medicare payer contracts in negotiations for access as new products reach market.  However, this is purely speculative, as any intentions of Trump would require significant support from Congress to reform existing laws restricting government influence in negotiations.  Unusually again, this may be an area where bipartisan support emerges.  The new Democratic Senate minority has displayed a willingness to work with the new administration where possible. Given the role of pharmaceutical pricing in several controversies in 2016, it may prove an attractive target issue for politicians seeking compromise in a highly polarised government.

While the revenue impacts of negotiation would be considerable, we still consider its passage quite unlikely overall. Manufacturer advocacy organisations like PhRMA would be likely work to forestall such a program, likely employing some of the tactics that worked so successfully to reverse public opinion on California’s Prop 61 on pricing reform (for more on this, read CBPartners’ update on this and the similar Vermont legislation). This issue will be another test of how closely Trump intends to stick to his campaign promises, and how much of a priority it becomes in the landscape of a unified Republican government.