What Will President Trump’s Medtech Policies Be?

By Ames Gross, President and Founder of Pacific Bridge Medical

This article was also published on MedTech Intelligence.

During his campaign, President Trump ran on an “America-first” platform, vowing to protect American workers and industry. President Trump promised to completely overhaul the United States’ trade and regulatory policies as part of his economic plan. With the new administration in place, President Trump’s policies have started to take shape.

One of President Trump’s most significant actions thus far has been signing a Presidential Memorandum withdrawing the United States from the Trans-Pacific Partnership (TPP). As discussed in my January column, the TPP is a trade agreement among 12 countries, including Japan, Vietnam, Malaysia, Singapore, and some South American countries. The TPP would have helped medical device companies in two main ways: (1) removing tariffs as high as 30% in some countries and (2) improving transparency and the medtech regulatory processes for the countries included. With the United States no longer part of the TPP, the future of the agreement is unknown. Most of the TPP countries are upset with the United States for withdrawing from the agreement. Many of these countries may join China’s free trade agreement (which does not include the United States) or attempt to negotiate bilateral trade agreements with the United States.

During his recent visit to the United States, Japanese Prime Minister Abe and President Trump announced they would begin looking into the possibility of negotiating a bilateral free trade agreement. The White House also announced that the government is considering negotiating a trade deal with New Zealand, another TPP country, and re-negotiating the existing trade deal with Australia, also a TPP country. The Trump Administration has clearly indicated its intent to pursue bilateral trade deals to replace the TPP, but such negotiations are a lengthy process. For example, the United States entered bilateral trade negotiations with South Korea in early 2006, but the final free trade agreement came into effect March 2012, six years later.

In addition to withdrawing the United States from TPP, President Trump pledged to drastically cut regulations. The President has stated on numerous occasions his intent to reduce FDA regulations by 75%–80%. The Administration is already working toward this goal. In theory, once implemented, registering medtech products with the FDA should be a much easier process. While this could be advantageous for industry, it may lead to more adverse events for patients.

On February 24, 2017, President Trump signed an Executive Order on Enforcing the Regulatory Reform Agenda. Each government agency (including the FDA) is now required to designate a regulatory reform officer (RRO) and establish a Regulatory Reform Task Force. According to the executive order, each task force will “evaluate existing regulations” and “make recommendations to the agency head regarding their repeal, replacement, or modification.” Section 2, Part D states:

At a minimum, each Regulatory Reform Task Force shall attempt to identify regulations that:

(i) eliminate jobs, or inhibit job creation;

(ii) are outdated, unnecessary, or ineffective;

(iii) impose costs that exceed benefits

(iv) create a serious inconsistency or otherwise interfere with regulatory reform initiatives and policies.

Of course, if the FDA is downsized, it will mean fewer people to approve medtech products, which may make the process take a longer time.

The President’s economic plan also involves cutting taxes for individuals and corporations. The medical device excise tax may be one of the first of President Trump’s tax breaks. In early January 2017, Representative Erik Paulsen (R-MN-3) introduced a bill to the House of Representatives, proposing the repeal of the device tax. The bill now has 246 co-sponsors from both parties.  Obviously, this should help device companies if the device tax is terminated.

The medical device excise tax went into effect in 2013 to help fund the Affordable Care Act (ACA). In 2015, however, President Obama suspended the tax for two years through 2017. A 2015 Senate study found the tax harmed medical device companies and reports indicate that investment and medtech job creation has increased during the suspension period. Proponents of eliminating the tax permanently hope medtech companies will be able to produce cheaper medical devices in the United States.

That said, there is still a great deal of uncertainty surrounding President Trump’s trade policies. On numerous occasions, President Trump has discussed imposing tariffs on imports. Earlier this year, there were reports that the Administration was considering tariffs as high as 20% on all imports. President Trump has even raised the possibility of imposing a 45% tariff on Chinese imports. Should the Administration follow through, it is highly likely the Chinese government will retaliate by imposing similar tariffs on American medical exports. China is one of the United States’ largest trading partners, and a trade war between the two nations would be costly to both sides, severely hurting U.S. medtech companies that source components or devices from China or export finished medical devices to China.

At this time, it is still too early to tell how President Trump’s policies will pan out. On the drug side, President Trump wants to reduce drug prices, but will he also want to reduce device prices? Serious negotiations for bilateral trade agreements have not yet been announced. In addition, the President continues to consider imposing tariffs on imported goods, and a trade war will not help the medtech industry as it looks to expand its business in Asia.