Stockholm (HedgeNordic) – The election of Donald Trump as U.S. President brought uncertainty to various areas of the economy, particularly in healthcare, trade, and regulation. As investors and companies await specifics on Trump’s policies, market volatility rose, reflecting widespread uncertainty about how his administration would address both domestic and global challenges. “The healthcare sector is one of the world’s most regulated sectors, and the election in the U.S. naturally has a major impact on future policy decisions,” remarks Hugo Schmidt, Portfolio Manager at Rhenman & Partners Asset Management.
“The healthcare sector is one of the world’s most regulated sectors, and the election in the U.S. naturally has a major impact on future policy decisions.”
Hugo Schmidt, Portfolio Manager at Rhenman & Partners Asset Management.
The team at Rhenman & Partners, which manages a long-biased long/short equity fund with a focus on healthcare, has identified several key discussion points from the new administration and Congress that could shape the sector. “After elections, reorganizations within government agencies are quite common,” begins Schmidt, who is part of the five-person investment team at Rhenman & Partners. “The Trump administration is expected to appoint more industry-friendly managers and officials at the agencies that regulate the healthcare sector, particularly the Centers for Medicare and Medicaid Services (CMS) and the Food and Drug Administration (FDA).”
The Biden administration previously launched a drug negotiation program within Medicare. “The Trump administration is not expected to shut down the program,” notes Schmidt. Instead, the expectation is that “the “new” CMS will have a more constructive approach to the negotiations.” If all else remains the same, this could be advantageous for pharmaceutical companies. “Another concrete area where we expect a change in stance from CMS is in reimbursements within Medicare, the federal retiree health insurance program,” continues Schmidt. During his campaign, Trump indicated a desire to improve these reimbursements, which could potentially drive an increase in healthcare consumption.
“The incoming officials at the competition authority Federal Trade Commission (FTC) are also likely to become more industry-friendly, which will lead to an improved takeover climate,” argues Schmidt. “The large pharmaceutical companies are facing major patent expirations and need to replenish their pipelines, for example, by acquiring smaller companies with innovative therapies,” he explains. Finally, the team at Rhenman & Partners anticipates that the number of uninsured Americans may rise under the new administration. “Republicans want to eliminate subsidies for Obamacare and reduce costs in Medicaid,” says Schmidt. “However, this is expected to face strong opposition, especially from the influential hospital lobby.”
“[I hope to] see reduced regulation around mergers and acquisitions, as well as a more favorable pricing negotiation scheme for pharmaceuticals, which is currently being implemented. There are certain areas that could be improved.”
Henrik Rhenman, founder of Rhenman & Partners Asset Management.
Overall, founder Henrik Rhenman hopes to “see reduced regulation around mergers and acquisitions, as well as a more favorable pricing negotiation scheme for pharmaceuticals, which is currently being implemented. There are certain areas that could be improved.” Portfolio manager Kaspar Hållsten shares Rhenman’s perspective, adding that “some of the larger pharmaceutical and medical technology companies will need to acquire new technologies to enhance their product portfolios, especially given patent expirations and other factors.” He also points out that an improved interest rate environment and deregulation “could potentially drive increased interest in smaller growth names within the sector.”
