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How a Donald Trump Presidency Could Affect Biotech Stocks

Image source: Flickr user Jamelle Bouie.

Hillary Clinton has not been a friend to biotechnology stocks on the campaign trail, and as a result, investors sold off biotech stocks in anticipation of her winning the presidency. Now that Donald Trump has successfully upset Clinton and won the White House, investors may want to re-evaluate their exposure to this high-growth industry. Will a President Trump be good for biotech stocks? Let's take a closer look at what President Trump could mean for biotech investors.

A friendlier foe

Trump often struck a populist tone on the campaign trail, but even so, he remained far friendlier to the biotech industry than Hillary Clinton. Clinton made waves last year when she called out Martin Shkreli's decision to acquire and sharply raise the price of Daraprim, a decades-old drug used to treat parasitic infections.

As part of her healthcare plan, Clinton proposed wide-ranging policies to crimp drug prices and lower healthcare payers' drug costs. These policies included increasing regulation and oversight via caps on patient drug spending, removing tax deductions for drug marketing, and granting Medicare negotiating power. She also suggested requiring reinvestment in R&D, shorter exclusivity periods for biologics, and drug reimportation from countries that pay less for their medicine.

Trump has backed Medicare negotiation and reimportation in the past, but he has otherwise been silent on the drug pricing debate. Trump's pro-business stance could mean he'll pose less of a headwind on industry profit, and that could mean that biotech stocks perform better under his leadership than they would have otherwise.


Pros and cons

Repealing Obamacare is one of Trump's biggest policy positions, and if he follows through with his plans to dismantle the Affordable Care Act, it will have both good and bad implications for biotech stocks.

As a refresher, Obamacare created marketplace exchanges through which subsidized insurance plans could be purchased. Over 12 million Americans enrolled in plans via these exchanges in 2016. Obamacare also included a Medicaid expansion provision that was adopted in over 30 states. Over 10 million people have enrolled in Medicaid since Obamacare's launch.

The enrollment of millions of Americans in private and public insurance plans since Obamacare's inception has undeniably increased prescription volume and boosted revenue at drug companies. Therefore, unless Trump replaces Obamacare with something "better," biotech companies could see...