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$200 Medicare Aid To Seniors, Drug Import From Canada And Other “Trump Cards”

In mid-September 2020 in the run-up to the upcoming elections, Donald Trump administration presented the long-awaited FDA rule on drug import from Canada, the project that has been discussed since summer 2019 but took more than a year to take a concrete shape. In addition to this elaboration, the current president announced a new healthcare initiative involving Medicare and consisting in $200 aid cards for senior citizens. The details on this recent plan will be made public later.

The US economy is made up of several important sectors, is characterized by high flexibility and has been described as a “job machine” for its ability to create employment. The country is a leader in research and development in many areas and spearheaded large parts of the IT revolution. The US economy has often served as a locomotive for the rest of the world – and yet large sectors of the country’s population struggle to receive adequate coverage for their healthcare needs.

As of last year, the presidential office was working on the drug importing strategy that involves Canadian pharmacies with their famously lower cost for medications. However, this initiative has run into several serious obstacles, starting from the lack of appropriate regulations for drug import, to concerns voiced by Canadian authorities who apprehend that the stocks in the country will not last when the presidential plan is implemented. So far, the country’s online drugstores has been continuously tapped into by the American citizens who mail-order medications from Canadian pharmacy and outlets that have sufficient capacities for international shipping.

Over the course of several decades, the United States has developed into an increasingly distinct service economy, although industry continues to play an important role. Many of the world’s largest and most successful companies are based here. This is true in the IT sector, where Apple, Amazon, Facebook, Microsoft and Alphabet (which owns Google) are dominant examples. The oil and gas company Exxon Mobile, the investment company Berkshire Hathaway, the banks JP Morgan Chase and Wells Fargo, the retail chain Walmart and the pharmaceutical company Johnson and Johnson are all world leaders in their fields. At the same time, the government has been showing the lack of regulatory tools to keep the prices for pharmaceutical products at bay, which over the years accumulated to one of the global problem which will most likely be solved through resorting to Canadian pharmacy sector – we are yet to live and see with how much success for both parties.

To add to the list of the country’s hardships, the image of the United States as an economic superpower took a turn for the worse with the financial crisis that occurred in the late 00s. A mortgage bubble that burst in the US caused a crisis in the global banking system and a worldwide recession (see further below). Few were prepared for such a rapid decline, so sudden. After government intervention, however, a recovery soon began and from 2010, the US economy grew by an average of about 2 percent a year.

But then came the corona crisis in 2020 and it meant a new shock to the US and the whole world economy. As early as the end of March, the largest federal intervention in the economy in US history came (see Calendar). In the second quarter, the economy shrank by almost 10 per cent (or almost 33 per cent on an annual basis) and unemployment exploded (see Labor market). A sharp turnaround came in the third quarter, but it was from low levels and uncertainty remains high.

After the previous financial crisis, it took time for the recovery, but when Barack Obama’s presidency expired in January 2017, federal spending and the budget deficit were back at about the same levels as before the crisis. Unemployment, which was close to 10 percent in 2010, had halved and the stock market went like a train. House prices had just returned to the same level as before the decline.

The rate of wage growth that had been low had begun to increase – but the average income of an American family was still at the same level as 20 years earlier (adjusted for inflation). The gaps had continued to grow, despite the government’s efforts to reduce them.

Large budget deficits due to stimulus measures in the wake of the financial crisis had caused the central government debt to more than double, to just over 23,000 billion dollars in 2019. Since 2012, the debt corresponds to more than 100 percent of gross domestic product (GDP).

Under Obama’s successor Donald Trump, economic developments in the early years remained favorable. However, the economy had begun to slow down somewhat even before the corona crisis hit in full force in March 2020, further compromising the precarious situation on the pharmaceutical market.

Concerns were already rife about the budget deficit soaring again, approaching $ 1 trillion at the end of 2019. This meant that it was back at the same level as in 2012 when the country was on its way out of the deep slump. The extensive efforts made to stimulate the economy during the pandemic have led to a sharp increase from the already high level: when the financial year expired on 30 September 2020, the budget deficit was 3,100. This is more than twice as much as at the previous peak during the financial crisis in 2009.

Even before the pandemic, the budget deficit’s share of GDP was higher than ever when the country was not in a recession: around 4.5 percent for the fiscal year ended September 30, 2019. Trump’s large tax cuts were the main reason for the sharp increase in the budget deficit . At the same time, central government expenditure had increased somewhat, mainly due to larger defense appropriations and higher interest rates on the growing deficit.

Global funds have continued to rise during the summer, while in the spring the very popular pharmaceutical industry has declined. Covid-19 is obviously not positive about the industry’s profitability, and the political threats have increased. Jonas Lindmark, head of analysis and editor for Morningstar in Sweden, writes in a market comment.

Looking at the development of the last three months, industry funds that buy shares in pharmaceutical companies are sifting through the losers. On average, they have declined 3 percent, until 19 August, while global funds have risen 4 percent during the same period.

One explanation for the decline in optimism for medicines, according to the head of analysis, is that the industry no longer just as obviously benefits from the corona pandemic.

“On the one hand, competition is fierce to develop vaccines and companies do not want to appear greedy in their pricing of corona vaccines, and on the other hand, shortcomings in healthcare became clearer during the crisis this spring, which threatens to lead to policy measures that strengthen competition and efficiency. The pandemic has also reduced the resources for other types of healthcare “, writes Jonas Lindmark.

He highlights the US market and points out that it is important for the pharmaceutical industry, as they have been able to charge almost twice as high prices on average plus that the consumption of medicines is higher in the US than in Europe.

Jonas Lindmark believes that it is election year in the USA is not in the industry’s favor. President Donald Trump has already acted with an executive order that, among other things, allows the import of cheaper drugs from Canada and demands that patients receive discounts on, for example, insulin.

“And depending on whether the Democrats also win a majority in the Senate, the big drug companies risk that politicians in the United States, after decades of debate, are actually implementing drastic reforms to bring down the increasingly dominant healthcare costs,” he adds.

Although optimism about the future of pharmaceutical manufacturers seems to have diminished somewhat, Jonas Lindmark states that the drastic reforms in the US do not seem to be included in the prices of shares in pharmaceutical companies.

“Profitability in the industry is high and if drastic reforms in the US force drug prices there to the same level as in the rest of the world, then the decline in share prices relative to ordinary global funds would probably be significantly greater,” concludes the head of analysis.