Navigating Policy Whiplash: Implications for Biopharma

Navigating Policy Whiplash: Implications for Biopharma

The waves are picking up, the surf is churning, and clarity on the horizon has disappeared. It’s 2025, the new administration is in, and the biopharma status quo is out.

In just a month, the Trump administration appointed, and the Senate confirmed, Robert F. Kennedy Jr. to lead HHS and has also signed over 75 executive orders, memos, and proclamations, which may have direct and indirect impact on healthcare. This overwhelming volume of change in such a short period of time is creating uncertainty across the healthcare industry, including biopharma companies, healthcare delivery organizations, research institutes, patients, and payors.

This uncertainty and the implications will settle, of course, over time. However, those days are far ahead of us, and the industry must continue operating. In the near term, we see several areas of upheaval across the biopharma and broader healthcare industry that warrant close attention – and we believe companies can take actions now to help weather the uncertainty.

Here are 7 key uncertainties we’re keeping an eye on…followed by what we think biopharma companies can and should do now, to weather the uncertainty.

Diversity in Clinical Trials

Within the first two days of taking office, the new administration issued an executive order around “Ending Racial and Wasteful Government DEI Programs and Preferencing”, eliminating several DEI programs within the federal government.[1] Subsequently, the FDA removed the draft guidance on improving diversity in clinical trials from its website.[2] The implications of removing diversity requirements can be severe, as seen in the case of prostate cancer research. Prostate cancer research trial representation has historically been made up of ~80% white males, but only ~10% African American males, despite affecting African American men at a disproportionately higher rate.[3] A lack of diversity initiatives could lead to the loss of deeply needed insights for different patient populations.

National Institute of Health (NIH) Grants

The NIH Grants Policy that went into effect on Monday, February 10^th imposes a 15% cap on NIH support for indirect costs (F&A, IT, support, maintenance, etc.). However, the NIH-reported average indirect cost rate has been much higher at ~28%, with some academic research institutes receiving >50%.[4] These billion-dollar cuts could lead to layoffs, halted studies, lab closures, hiring freezes, and the loss of scientific talent. Many early stage biotechs depend heavily on NIH SBIR and STTR grants, as well as partnerships with research institutions.[5] While the direct implications are yet unclear, the healthcare industry and patients could be directly impacted if academic studies slow, tech transfer offices are understaffed relative to historic norms, and the pace of innovation making its way through the discovery, development and commercialization stages slows.

In response to the uproar around indirect cost caps, 22 state attorneys general have sued the new administration for violating laws protecting NIH grants for medical research against “arbitrary and unilateral” cuts. In response to this, a federal court in Massachusetts issued a nationwide temporary restraining order on the NIH grant cap on February 10^th. A hearing has been scheduled for February 21^st.[6]

Funding Cuts to Medicaid & Medicare

The newly formed Department of Government Efficiency (DOGE) aims to curb federal spending by $1.5 trillion.[7] While Medicare is excluded from funding cuts at this point, Medicaid is a target as the largest single source of federal funding for states.[8] Medicaid covers 80M lives and is critically important for low-income populations to access care. The impact of a cut could lead to reduced or loss of coverage for millions of people and financial instability for all healthcare delivery organizations that rely on Medicaid reimbursement to provide care to patients. While the new administration clarified that the Medicaid payment portal issue on January 28^th was simply due to an “outage”, the potential ripple effects of disruption to payments were quickly felt throughout the healthcare provider community.[9] Changes to Medicaid funding may emerge as stricter enrollment and renewal requirements, potential work requirements, and challenges in maintaining coverage.

FDA Staff Cuts

The new administration reported plans to potentially lay off thousands of FDA employees.[10] Other agencies, such as the NIH and CDC, have already faced staff cuts, primarily consisting of probationary workers.[11] Cuts could lengthen review timelines, affect the ability to meet PDUFA dates, and delay patient access to life-saving therapies. Staff cuts and the departure of key leaders at the FDA exacerbates the loss of institutional knowledge and expertise, resulting in potential lower quality reviews and oversight. They may also impact the FDA’s ability to effectively conduct facility inspections, stay up to date on the latest science, and respond to crises. User fees within PDUFA should, in theory, protect the product review process, but it’s hard to imagine how broader FDA cuts wouldn’t have some impact.

Tariffs

On February 1^st, the new administration announced a 25% tariff on imports from Mexico and Canada and 10% from China to promote domestic manufacturing. While the tariffs on imports from Mexico and Canada were paused a few days later, uncertainty remains, with tariff policy changing on a day-to-day basis. China, Mexico, and Canada are among the top five countries from which the U.S. imports pharmaceutical goods by volume[12], so new tariffs could potentially impact drug pricing and profitability and supply chain speed and availability. Additionally, while industry giants like GSK and Novo Nordisk believe they can withstand potential cost implications from tariffs[13], generic manufacturers and smaller companies may feel the impact more acutely and could be forced to raise prices or exit the market.[14]

Drug Pricing

The new administration has indicated its commitment to negotiating lower drug prices.[15] However, details are unclear on how serious they might be, as well as the approach they might take. The recently implemented IRA process kicked off a formal approach to negotiating drug prices, but it is unclear whether the new administration will support the IRA or look for other avenues for reducing drug costs. Similarly uncertain is the administration’s approach to pharmacy benefit managers (PBMs), which it, along with the Federal Trade Commission (FTC), has repeatedly criticized and accused of hiking up out-of-pocket costs for patients.[16] While widespread public and policy discourse continues around lowering drug prices, it is yet unknown what steps will be taken.

Vaccines

The future of vaccine policy is largely up in the air following the appointment of Robert F. Kennedy Jr. to head the HHS. While he expressed more moderate views on vaccine policy during his Senate hearing, Kennedy has historically taken an anti-vaccination stance.[17] In the coming months, there are a number of pending regulatory decisions and meetings on vaccines that could be impacted by new policy.[18] Biopharma companies who largely play in the vaccine space may start to worry about the viability of their pipelines. Some public health experts have suggested that Kennedy could set impossible-to-meet standards for vaccine approval and other barriers to developing vaccines.[19] However, Pfizer’s CEO voiced support for a collaborative relationship with Kennedy and HHS, and Moderna – a company rooted in vaccines – says that it does not plan to make changes despite impending policy threats.[20]^{, [21]} However, smaller companies may opt to avoid future vaccine development as they manage their pipelines and resources.

So, what can biopharma companies do during this time of uncertainty?

Policy change in healthcare is inevitable, and we cannot predict how the next few months and years will shake out with any degree of precision. Clearly, biopharma companies must actively monitor policy change to survive the chaos, but monitoring is not enough. We suggest three principles for navigating these uncertain waters: 1) Focus on the patient as the north star, 2) Engage and partner to chart paths, and 3) Increase organizational agility and ability to change course.

Focus on the patient as the north star: The patient has always been at the center of biopharma decision making and investment. Now more than ever, maintaining focus on the unmet needs of the patient can help bring clarity through the shifting policy landscape. For example, irrespective of the new administration’s stance on DEI, it is critical for companies to ensure their clinical trials reflect the representative patient demographics of the target indication to maximize potential patient impact. This is simply good clinical practice, independent of the political rhetoric around DEI.
Engage and partner to chart paths: Biopharma companies need to make their voices and perspectives heard to enable continued development of, and access to, innovative medicines. As of this writing, the CEOs of Pfizer, Gilead, Merck and PhRMA are planning to meet with the new administration on February 18^th. Over the coming weeks and months, we encourage biopharma organizations to engage with both public and private stakeholders and build coalitions to shape policies and develop solutions that keep patient need at the center and ensure patients can continue to access and benefit from critical healthcare products and services.
Increase organizational agility and ability to change course: In an industry in which it takes more than a decade to bring a product to market, agility is not built into organizational DNA. Annual planning cycles and siloed organizational structures limit biopharma companies’ ability to adapt to unexpected changes in the regulatory and reimbursement environment, such as changes in FDA timelines and guidelines or new CMS directives impacting pricing strategies and coverage policies. Increasing agility will require more fluid contingency planning, greater connectivity between market monitoring and decision-making forums, and more seamless ways of working across functions to pull through implications of strategic shifts driven by environmental changes.

We know the seas will remain turbulent in the days, weeks and months ahead, but we see a navigable path through the choppiness – one that will enable the healthcare ecosystem to continue developing, delivering and providing access to innovative products and services to the patients that need them.

References

[1] Ending Radical And Wasteful Government DEI Programs And Preferencing | The White House

[2] FDA purges material on clinical trial diversity from its site, showing stakes of Trump DEI ban | STAT+

[3] The State of Diversity in Cancer Clinical Trials 2024 | Lazarex Cancer Foundation

[4] Supplemental Guidance to the 2024 NIH Grants Policy Statement: Indirect Cost Rates | Grants.NIH.gov

[5] Doing business with the NIH | PubMed

[6] NIH Case Update: AG Campbell Temporarily Blocks Trump Administration From Defunding Medical And Public Health Innovation Research | Mass.gov

[7] GOP calls for $1.5T in cuts, much of which could come from healthcare | Healthcare Dive

[8] Medicaid Financing: The Basics | KFF

[9] Medicaid payment systems back online after outage – POLITICO

[10] Major FDA staff cuts would slow drug reviews, experts say | Endpoints

[11] NIH, CDC cuts expected as Trump shakeup hits healthcare