By Erik Clausen
Several months have passed since the U.S. Presidential election, and…we’re still here, folks. After years of political rhetoric and theatrics, and a few months of uncertainty, we are starting to gain some clarity around exactly what the new administration and its policies might mean for the life science industry and, by extension, marketers within it.
Most importantly and as a wise man wrote before the election, “There is no need for panic.”
Edvard Munch – The Scream
Now that the rhetoric has momentarily quieted, we need to balance Trump’s desire to make dramatic policy changes with the realities of the legislative process and with the expectations of a public that benefits from life science and healthcare innovation. Widespread policy changes take time to implement and often require strong Congressional support, even with a Republican-controlled House and Senate. The recent defeat of the health care bill is a case in point.
In other words, as we look at the major policy changes that are likely to affect life science marketing in the years ahead, we need to recognize that there will be time to adjust marketing strategies and tactics accordingly. This may even mean building multiple marketing plans to address different contingencies.
Possible repatriation of US dollars
U.S. pharmaceutical companies have substantial funds tied up in accounts overseas due to punitive tax laws. The administration has proposed, as part of his economic stimulus plan, to dramatically reduce this tax rate and encourage those dollars to come back to the U.S.
In theory, by lowering the tax burden on these businesses, the economy will see an uptick as businesses are encouraged to invest. These companies benefitting from tax relief would in turn reinvest those dollars domestically in the form of new deals, R&D, acquisition and job creation.
Since pharmaceutical and instrumentation companies typically grow based on acquisition, we could see a resurgence in life science M&A and dramatic increases in the value of emerging biotech, diagnostic and tools companies. No doubt, these topics are top of mind at industry gatherings like the January 2017 J.P. Morgan Healthcare conference.
If this move does have the immediate and positive effect on the life science sector as promised, it would give corporate brand managers and marketers much to do to position their companies correctly to take full advantage of the M&A environment.
Of course, this assumes that the financial boon to corporations is reinvested or used for acquisition and not simply distributed to shareholders. Increased deal-flow will lead to increased budgets. This will undoubtedly bring increased noise in a busy economy. Therefore, we should focus on building long-term brand equity in an expanding GDP and economy.
Corporate tax rate reduction
The administration will also propose in the President’s Budget Bill, a much lower corporate tax rate. This plan would significantly reduce the cost of capital and reduce the marginal tax rate on labor.
By most analyses, these incentives could increase the U.S. economy’s size in the long run, boost wages, and result in more full-time equivalent jobs—including in the life science sector. The question remains, what the estimated reduction in federal revenue will mean for federal funding of medical and scientific research. Such grants often precipitate early discovery that soon become commercialized.
The size of the proposed tax breaks for corporations are, simply put, “Huge.” But if the administration can actually get it through Congress, it has the potential to give corporations exponential buying power, increase cash flow, build up inventory, and re-invest in technology. Dismissing any possibility of a bubble and or the rich simply getting richer, these tax breaks should create jobs and boost all sectors of the economy, including life science and healthcare.
Reforming the FDA
In his 100-day plan, Trump specifically cited, “…cutting the red tape at the FDA…” as among his highest priorities. In the plan, he stated that, “…there are over 4,000 drugs awaiting approval, and we especially want to speed the approval of life-saving medications.” We can only assume that such reforms would also have a direct effect on approval and clearances for new medical devices and diagnostic tests, as well.
An accelerated approval process at the FDA could potentially have a positive effect—at least in the short-term—on the life science sector. With therapeutic candidates and devices moving more rapidly through review than anticipated, biotech, pharmaceutical and device companies in mid to late stage clinical phases could see increased valuations of companies with early approvals.
Additionally, this could encourage earlier stage companies to get more ambitious about moving candidates to the clinic and could make would-be acquirers more bullish.
In the long term, if that accelerated review brings products to market too quickly, it could threaten public health, cause another costly set of reforms, and damage the brands of those companies.
What does the new agenda mean for marketers?
While it will take some time to feel the effects on any proposed legislation or policy changes, the administration will tie everything back to growing the economy: no small challenge. A lot has to come together with or without a cooperative Congress. The President will have to build a consensus.
For now, as marketers we need to do what we’ve always done—assess market opportunities, pinpoint our target audiences, develop smart strategies to reach and influence their behavior, and measure outcomes. Certainly, researching the impact of policy decisions is part of that research, but acting too quickly on proposed policy changes only fuels uncertainty.
And, if there is one truth in the market, it doesn’t like uncertainty.
In the end, even if the President is able to pass a fraction of what he’s proposing, it should lead to economic prosperity and marketing opportunity in our industry.
Now, if we could just turn off his Twitter account, we might make social media great again, as well.
About the Author
Erik Clausen is part of the Chempetitive Group, a Chicago based marketing initiative for pharmaceutical, chemical, biotechnology, diagnostics, and medical devices.
Graphics: THE SCREAM courtesy www.EdvardMunch.org
All other graphics from MS Office.
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