FrontierView’s global teams rely on scenario-based frameworks to prepare for changing, and often volatile, political and economic environments. Our analysts and practice leaders adapt their views in real-time as events unfold to ensure clients receive the most up-to-date and timely market monitoring insights.
On September 24, House Democrats decided to open an impeachment inquiry against President Donald Trump after revelations regarding his interactions with Ukraine. This means politics is even more likely to crowd out substantive policy developments on Capitol Hill ahead of the 2020 election. North America trade and drug pricing legislation are two of the most impactful policy areas that are unlikely to see substantive progress.
The USMCA and NAFTA
The replacement for the North American Free Trade Agreement (NAFTA) negotiated under President Trump, the US-Mexico-Canada Agreement (USMCA), has been signed by all three countries. But the USMCA requires ratification by the US Congress. In our Events to Watch 2019 report, Practice Leader for Global Economics, Ryan Connelly predicted that the Democrat-controlled House of Representatives would not pass the USMCA prior to the 2020 elections. Doing so would grant Trump a clear symbolic victory in what was always expected to be a very acrimonious election cycle. However, the Democrats have not wanted to appear obstructionist – preferring instead to issue specific complaints about the USMCA, mainly on the lack of labor and environmental protections, that they wanted to see addressed.
To his credit, US Trade Representative Robert Lighthizer has engaged seriously with Democrats, and has gotten some of those concerns addressed. But this doesn’t change the political dynamics at play. The formal launch of impeachment hearings last week only confirms FrontierView’s view that there will be no significant legislative achievements prior to the 2020 election.
Ryan Connelly, Practice Leader for Global Economics
A big winner of the impeachment inquiry: Pharma?
On September 19, the Republican president tweeted that it was “great to see Speaker Pelosi’s bill today,” referring to the Democratic House Speaker’s sweeping drug pricing legislation that, among other things, proposed tying the payment of the most common drugs paid for by Medicare to the prices that a set of European countries pays. President Trump himself had previously proposed international reference pricing in Medicare Part B, which are drugs that are injected in physicians’ offices, putting him at odds with his Republican colleagues in Congress.
But what was already a politically complicated alliance on addressing drug prices ahead of the 2020 election now becomes just plain fraught. Democrats’ decision to move forward on the impeachment inquiry places Republican members of Congress in control of Trump’s fate. Republicans, meanwhile, are adamantly opposed to what they describe as ‘price controls,’ and particularly controls that are set by countries with far more government involvement in their healthcare systems.
Trump’s political capital to press his GOP colleagues on such a controversial policy is likely only to decline in the coming weeks and months, while the GOP’s willingness to work with Democrats on the issue was low to begin with. That said, Republican Sen. Chuck Grassley and Democratic Sen. Ron Wyden have released a bipartisan bill to address drug prices, which would cap the price increases allowed for drugs that Medicare pays for at inflation rates. But Grassley is still searching for more GOP support and has said the timing is likely to slip into 2020.
The bottom line: Don’t expect much — if any — action on drug pricing before the 2020 election, and expect an even more vociferous fight over healthcare policy in the campaign.
Stephen Majors, Director of Healthcare
FrontierView’s Healthcare team is at the forefront of key trends impacting the industry. Our goal is to work with clients to deliver tailored growth solutions to support your critical business decisions and growth strategies. How can we help you deliver better outcomes for your business? Contact us here to connect with a team member to get started.