By Josh Nathan-Kazis
Donald Trump's announcement that he will nominate the vaccine skeptic Robert F. Kennedy Jr. to lead the Department of Health & Human Services stunned Wall Street, blasting away any lingering notion that the former president's second term will be bound by predictable red lines.
Trump had pledged in the waning weeks of his campaign to hand control the nation's public-health system to Kennedy, who until recently led the nation's most prominent antivaccine advocacy group. On Wall Street, that promise may have been taken seriously, but not literally.
In late October, the co-chair of Trump's transition committee, Cantor Fitzgerald CEO Howard Lutnick, seemed to tell CNN that Kennedy wasn't in contention for the HHS job.
Now, Trump's apparent reversal, announced late Thursday, makes it impossible to guess what might come next for the healthcare industry. Kennedy is unlike anyone else to ever hold the position.
"Nearly everything is possible," wrote Chris Meekins, Raymond James' Washington healthcare policy analyst, in an email to Barron's late Thursday. "There is no question that if he is confirmed he makes nearly all of healthcare more challenging to invest in."
As HHS secretary, Kennedy would be in a position of authority over the appointed leadership of the Food and Drug Administration, the Centers for Disease Control and Prevention, the National Institutes of Health, and the Centers for Medicare and Medicaid Services. All of those, alongside a long list of lesser-known agencies, are within HHS.
That makes the future of the industry far less clear. Shares of the largest vaccine makers, including Pfizer, GSK, and Sanofi, are suddenly far less investible. Prospects for the biotech sector, and the biopharma industry more broadly, which depend on a reliable FDA, are in doubt as well.
And it could raise questions for managed-care stocks, which work closely with the CMS.
Kennedy, a vocal skeptic of vaccine safety, has boosted the discredited theory that childhood vaccines cause autism. He also holds more mainstream opinions, pushing for the removal of ultraprocessed foods from school lunches and for limiting the use of agricultural pesticides. As Barron's reported Thursday, his opposition to fluoridation is in line with some new research on the issue.
While the Senate will need to confirm Kennedy's appointment, it is impossible to tell how high a hurdle that will be. Kennedy is far from the only out-of-the-mainstream pick Trump has announced in recent days, and Senate Republicans may be loathe to hand the new president too many defeats early in his tenure.
The nomination fight will likely tee up a lobbying battle between the industry and the Trump administration that will unfold over the coming months, though big pharma companies were mum on the Kennedy appointment on Thursday and Friday. Stephen Ubl, the president and CEO of PhRMA, biopharma's lobbying arm, said in a statement late Thursday that industry has "long argued" the U.S. should do more on chronic disease, an area of focus for Kennedy.
"We want to work with the Trump administration to further strengthen our innovation ecosystem and improve health care for patients," Ubl said.
Healthcare stocks remained flat between the election and Kennedy's nomination, but were down on Friday. The Health Care Select Sector SPDR exchange-traded fund, which tracks healthcare stocks in the S&P 500, was down 1.3% Friday. The SPDR S&P Biotech ETF, which tracks the biotech sector, was down 4.2%.
The biggest pain was among the vaccine makers, which were falling even before Thursday's announcement. Pfizer, the largest vaccine maker in the world according to a recent World Health Organization report, was down 6.3% since the day before the election, including a 5.1% drop on Friday morning.
The next-largest vaccine makers by spending are Moderna, Merck, GSK, and Sanofi, in that order. Moderna, which only sells vaccines, has fallen more than 28% since just before the election, while Merck was down 3.5%. The American depositary receipts of GSK and Sanofi were down 9.1% and 9.6%, respectively.
Investors are also fleeing smaller vaccine-focused biotechs. Novavax, which sells a Covid-19 shot, was down 22%. Valneva, which is developing a Lyme disease vaccine with Pfizer, has dropped 19%.
Perhaps the most significant question is what Kennedy could actually do if confirmed. Though it is difficult to see how he could successfully intervene in the scientific work of an HHS agency like FDA, he wouldn't need to meddle with vaccine approvals, or even pull vaccines from the market, to hobble the vaccine makers.
He would arrive at HHS at a moment when vaccine hesitancy is on the rise in the U.S. Influenza vaccine uptake has been dropping since the Covid-19 pandemic, particularly among younger people. During last year's flu season, 55.4% of children aged six months through 17 years received a flu shot in the U.S., down from 57.4% in the 2022-2023 flu season. The number was 63.7% in the 2019-2020 flu season, right before the pandemic.
A prominent role for Kennedy could create mixed messages about the safety of vaccination, reducing uptake even further. "A consistent message of how people can keep their families safe is very important," Dr. Joshua Sharfstein, a former principal deputy commissioner of the FDA, said before Kennedy was nominated. He is now vice dean for public-health practice and community engagement at the Johns Hopkins Bloomberg School of Public Health.
"If you have a pediatrician saying this will protect their child, and you have the health department saying this will protect your child, and you have the White House saying, 'You're putting your child at risk, what parent would possibly do this?'" Sharfstein said. "That's not good."
One explicit power Kennedy would have at HHS is to shape the Advisory Committee on Immunization Practices, the powerful group of experts that advises the CDC on how FDA-approved vaccines are used in the U.S.
The ACIP designs the vaccine schedules that lay out the shots that children should receive throughout their childhood and adolescence. Though patients might be able to access an FDA-approved vaccine that lacks an ACIP recommendation, insurers are only legally required to pay for shots recommended by ACIP.
Today, ACIP's members include prominent experts in medicine, health policy, epidemiology, pediatric infectious disease, and other related areas. Those members serve four-year terms; the terms of four of the 15 current voting members expire next year.
If Kennedy is confirmed as HHS secretary, he will have the ultimate say on who takes their places. "If there are recommendations that don't make sense, that could really pull vaccine access away from millions of Americans," Sharfstein said.
Kennedy's ability to actually interfere in the scientific work of the FDA, meanwhile, might be limited. "It's important to recognize that there are laws that govern what the agencies have to do," Sharfstein said.
The FDA is staffed by thousands of credentialed scientists whose work is insulated by law and process. Only a handful of political appointees work at the agency. "It's very hard to drive seismic change at the FDA, given the degree to which the FDA is a law-based bureaucracy," says Dan Troy, a former chief counsel to the FDA who later served as general counsel at GSK, and is now a managing director at the consulting firm Berkeley Research Group.
Still, HHS secretaries have meddled with the FDA's work in the past. In 2011, when the FDA sought to lift age restrictions on over-the-counter sales of the emergency contraceptive known as Plan B, President Obama's HHS secretary, Kathleen Sebelius, intervened to block the decision.
Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
November 15, 2024 12:36 ET (17:36 GMT)
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