Insurance coverage losses caused by the Trump administration's tax and spend law could make it harder for biotechs to secure funding and recruit patients for trials, experts have told Fierce.
The One Big Beautiful Bill Act—which was signed by President Trump last July, slashes more than one trillion dollars from Medicaid spending, institutes a nationwide work requirement to receive coverage, adds six-month eligibility checks and restricts immigrant coverage. These Medicaid changes will go into effect January 1, 2027. Supporters of the Bill argue the law will reduce fraud, abuse and wasteful government spending.
While exact numbers are unknown, the Kaiser Family Foundation estimated that the new requirements and loss of funding will cause around 17 million people to lose healthcare coverage, meaning individuals will lose access to primary care and other healthcare services obtained through Medicaid. Meanwhile, the healthcare infrastructure that provides care to Medicaid patients and is funded by those federal dollars will also shrink. This loss of coverage will have well-documented downstream healthcare impacts, but an overlooked consequence is how the loss of health insurance could dampen biotech innovation.
“If you constrict access to the treatments that are out there and make it harder for patients to access the coverage they need for innovative treatments, then you're going to have a loss of innovation as well,” said Jamie Sullivan, senior vice president of policy at the nonprofit EveryLife Foundation for Rare Diseases.
Speaking to Fierce on the sidelines of the Biotechnology Innovation Organization conference conference in San Diego last month, Sullivan explained that Medicaid recipients are unable to pay for medication otherwise, so cutting them out of coverage means fewer people in the market for new drugs.
Additionally, having health insurance means that your medical condition is likely to be identified earlier and with greater accuracy, providing biotech startups and their backers with important information about potential patient populations, Sullivan pointed out.
“With more knowledge about the population that's out there, investors and biotech companies can direct or tailor their approaches,” she added.
The increased recordkeeping that accompanies health insurance has benefits for clinical trials as well. This is especially important in the rare disease space, where recruiting trial participants is notoriously difficult.
“If health systems have more visibility into who is in their patient population [and] when a new potential treatment or trial comes online, trial sponsors are going to be able to do much more efficient recruiting by using that data as well,” Sullivan said.
Max Bronstein, CEO of boutique healthcare and life sciences consulting firm Aviva Strategies, spends much of his time speaking with healthcare and biopharma companies about policy goals. He agreed that the loss of insurance coverage caused by the Bill could make it harder for biotechs to source investment.
“Biotech companies are already confronted with regulatory risk, but a loss of coverage could cause investors to get skittish and move to less risky segments of the healthcare industry or leave healthcare altogether,” Bronstein told Fierce in a separate interview on the BIO sidelines.
Investors sticking with life sciences may choose to focus on broader indications or later-stage assets, he suggested.
“If I were a biopharma chief commercial officer analyzing the market and the payer mix for my potential product, I would see that Medicaid is a huge part of that for most diseases,” Bronstein said. “Revenue projections are not going to look as sunny after the Medicaid cuts.”
He singled out pediatrics and rare diseases as spaces that could be particularly impacted. About half of all rare diseases affect children and in many states these patients are immediately enrolled in Medicaid.
“These kids bill enormously to Medicaid, and until we have safe and effective treatments we need to keep the incentives we have to help smaller populations,” Bronstein explained. “Biotech is on the brink of curing life-threatening diseases, and patients being confronted with the risk of losing health insurance seems rather cruel.”