by Patrick Cox
February 15, 2017

It’s apt that President Trump is the oldest elected president in US history. Nothing better defines the biggest problem of our era… the aging of society.

Trump’s age doesn’t seem to be much of a problem for him. At 70, his schedule and workload are famously brutal and have been for years. The age problem is ours.

Of course, each of us is aging. But so is the American demographic. The median age of Americans is at an all-time high: more than 65 million of us are 60 or older. That’s up from about 49 million in 2004.

Medical expenses increase exponentially with age. That’s because the elderly need increased services. This causes healthcare costs to go up. In response to this increase in demand, the healthcare sector has grown to about 20% of US GDP (up from about 14% in 2000). It is now the largest economic sector.

The federal budget also reflects this issue. About 28% of the $4 trillion plus budget will go to Medicare and health spending. As the CBO points out, age-related healthcare spending is the only part of the budget (other than debt service) that is growing in relationship to the whole.

Oddly, the public and media don’t seem to be aware of (or at least concerned about) the enormous macroeconomic impacts of aging. But Trump’s economic advisors know just how pressing this issue is; they know these costs must be addressed if the president is to increase economic growth.

Trump is not going to push for some form of nationalization (like Obama, Sanders, or Clinton). Instead, he wants to make deals within market structures. That means regulatory reform.


The Contenders for FDA Chief

Personnel is policy. That’s why so many people in biotech and health care are focused on Trump’s FDA chief appointment.

At this point, many think that the field has narrowed to Jim O’Neill or Scott Gottlieb. Both men have called for FDA reforms, but there are differences.

Billionaire Peter Thiel (a tech insider and supporter of Trump) says O’Neill would bring a Silicon Valley style to the FDA. O’Neill has said that he would like to see a dramatic reduction in the time and costs for drugs to be approved. He’s also well-versed in anti-aging research. He knows that delaying the diseases of aging would cause healthcare costs to go down. O’Neill is viewed as the bigger disruptor.

Gottlieb is less controversial, and he seems to be the pharmaceutical industry’s choice. An MD and former deputy commissioner of the FDA, he has worked in the biotech industry. He has also advised big pharma, including GlaxoSmithKline. (One theory about the candidates is that more radical reformers have been mentioned to reduce pharma resistance to Gottlieb.)

Another contender, Joseph Gulfo, is seen as a compromise between O’Neill and Gottlieb. He has written about the impact of FDA reform and the need for more patient and doctor choice in a paper for the Mercatus Institute titled, “The Proper Role of the FDA for the 21st Century.”

Gulfo has also stated that the FDA must focus less on defining how drugs can be used and leave the practice of medicine to doctors. But in fact, this is already common practice. Off-label uses of approved drugs are routinely prescribed for conditions not endorsed or researched by the FDA. (The Obama FDA tried to stop the practice.)

Gulfo points out that the FDA increases drug costs by delaying approvals. He has said,

If approvals on a calendar basis were shortened, even by just two years, there are models that the contribution of development time to approval would mean less of a need for price increases and more exclusivity… those two years would reduce the development expenses and then with longer exclusivity, companies can recoup research and development funds easier. Also, more approvals is more competitors which equals lower prices.

In other words, an increase in approved drugs would lessen the importance of existing meds. This would reduce pressures to raise prices. This is not just theory. In every area of medicine, new biotechnologies promise superior alternatives to older drugs.

Big pharmaceutical companies are not eager to replace profitable drugs, so it’s not likely they would cheer this kind of reform. Competition, though, would force the industry to adapt to a faster pace of innovation.


Biotech Startups and the Public Would Benefit from Reform

Competition and regulatory reform would increase the number of drugs in the pipeline. Right now, extremely promising drugs are languishing due to a lack of interest from big pharma. If regulatory costs were reduced, big drug companies would be incentivized to increase the pace of collaborations with startup biotechs.

This would bring welcome relief for biotechs that have been beaten up by a series of political attacks. For investors, I think this will be the most important impact of Trump FDA reforms, regardless of who becomes the next FDA chief.

No matter what President Trump does, the population will continue to age. The old-age dependency ratio (OADR), the percentage of the population dependent on transfer payments from the working-age population, will continue to worsen.

The only real solution is anti-aging biotechnologies that put off or prevent expensive age-related diseases. I won’t write about that today, but I did do a short video on the topic recently.

For most of my life, I’ve made fun of questionable hockey stick graphs (the scientific equivalent of slasher movies). But the OADR hockey stick is real and won’t go away until true anti-aging meds are approved and widely used. (Cue the scary music and check out the World Bank’s OADR for the US.)

I wish I could be more optimistic, but many scientists in aging research were disheartened by Trump’s decision to keep NIH director Francis Collins in place (at least for now). Under Collins, NIH grants for anti-aging research were trivial… even though there is evidence that drugs like metformin could delay or prevent most cancers and many other age-related diseases significantly. An anti-aging metformin trial is already cleared by the FDA but is still not funded because the drug is off-patent.


— Trump FDA Chief Could Disrupt Biotech/Pharma Investing originally appeared at Mauldin Economics.