While the US consumer health industry will remain a strong centre for investment, development and technology innovation in 2017 and is expected to reach US$77 billion by 2021, the election of Donald Trump has created uncertainty among the industry, government agencies and consumers, especially around regulations, local production incentives, and changes to the Affordable Care Act.
What does this mean for the pharma industry?
During Trump’s meeting on January 31 with pharma leaders as well as the head of the industry’s lobbying group, the Pharmaceutical Research and Manufacturers of America (PHRMA), he demanded that the industry increase their local (US) production and lower their prices while promising to speed up the approval period for new medicines. But the issue with increasing local production is that it inevitably increases production costs. It is impossible to compete with Mexico on manufacturing costs, considering that NAFTA is still in place (and another 20 FTAs are still active) unless new subsidies are put in place and/or all of these FTAs are put on hold, which is an unlikely scenario.
This is just the beginning of a long negotiation period between pharma manufacturers and the current government, which might result not only in the government shortening approval periods for new drugs but also potentially creating new government incentives to hire more local talent, develop local facilities, pay less local taxes and attract more foreign direct investment (FDI). We might not only watch US companies bring factories back to the US, but also see Chinese manufacturers move to the US to skirt potential trade restrictions and jump on the “made in America” bandwagon.
The vitamin and dietary supplements (VDS) industry is also looking at different scenarios
While potential changes to regulation will continue to be an important issue for the industry as a whole, dietary supplement manufacturers in particular are facing a regulatory scenario very different than just a few months ago. In 2016 the FDA launched the New Dietary Ingredient (NDI) draft guidelines to improve dietary supplement companies’ NDI premarket safety notifications. Many industry experts believed that this guidance would potentially increase registration costs and expose proprietary blends to competitor scrutiny, which could damage development of such products crucial to the growth of the industry.
After Trump’s victory, it’s almost certain that the NDI draft guidelines will be shelved permanently, and all indications are that the Trump administration will attempt to ease burdens on the sale, positioning and marketing of VDS products. If Trump loosens regulations, products in the VDS industry would likely be able to reach the marketplace faster. This is a change that the industry on the whole supports, but the full ramifications are uncertain. Aside from getting products to market quicker, this scenario could both increase competition in an industry that already has a lot of players and decrease the quality of VDS because there would be fewer layers to ensure quality control, potentially leading to declining trust from consumers.
Meanwhile, the FDA hiring and regulatory freeze is adding even more uncertainty in the VDS community, as it is fully expected that in addition to curtailing regulations, the FDA will witness budget cuts and layoffs during this administration. In addition to less constrictive regulations, this likely will result in a competitive environment where claims abound and confusion reigns. Whether this helps the industry as a whole depends on to what degree consumers are put off by the forthcoming lack of transparency that would occur in such a competitive environment.
At the same time, the potential alterations to the Affordable Care Act (ACA) could be an opportunity for dietary supplement companies to create more partnerships with healthcare establishments to continue focusing together on prevention, with an aim to protect patients against future high healthcare costs in a post-ACA world. A great example of this is the partnership between Alliance Integrative Medicine (AIM), one of the leading integrative medical centres in the US, and Metagenics, a VDS and medical foods company.
The new open VDS process would be a big opportunity for start-ups
While the FDA freeze is still in place and big pharma is negotiating with Trump, plenty of local (US) start-ups are launching consumer health products and gearing up local US production, which likely would be supported by Trump’s new government incentives to increase start-up innovation. Also, fewer regulations from the FDA would favour start-ups because smaller companies would be able to reach the marketplace faster and under the new Trump administration they would have fewer entrance costs to get through regulatory approval. Furthermore, start-ups would be more nimble to adjust to the new lighter-FDA landscape than more established players.
It remains to be seen who in the VDS industry will most benefit from the plans to reframe the FDA, but regardless, it’s quite apparent that the industry is about to see pretty significant institutional changes in the coming months and years. Whether this results in the continued strong growth of the industry or consumer-confidence-inspired slowdowns is anyone’s guess at this point.