Healthcare and the RFK Effect

With the election in the rearview mirror and cabinet choices being made, we thought we’d check in with Marc Pentopouos, the stock picker for the healthcare/biotech portion of the Palumbo Emerging Growth Portfolio. Marc always has his ear to the ground and with RFK Jr. the controversial pick as Secretary of Health & Human Services, he has some early insights on what we might expect from HHS over the next several years, assuming, of course, that RFK Jr is confirmed.

PWM: Marc, with the understanding that it is very early to make definitive statements, can you give us your view of the Trump/RFK impact on the healthcare sector?

Pentopoulos: It’s difficult to pin down at the moment. We are still in the noise phase with regard to RFK Jr. I spent a bit of time looking at RFK Jr’s beliefs on healthcare and how that might affect the US healthcare system.  Much of his thoughts are around healthy living and personal choice.  Some of his ideas are a bit whacky but others are what is already done in other countries.

A lot of what he promotes is just healthy living and having more scrutiny over what is put into the food chain in the US.  I think a lot of Americans would agree with him here that the US could do a lot better here.

PWM: RFK Jr. is often characterized as anti vaccine, is this accurate? Might this position impact the vaccine manufacturers?

Pentopoulos: He is not necessarily anti-vaccine but does advocate for choice in vaccines, that is, not making them mandatory.  He does have some whacky ideas in that he thinks the MMR vaccine causes autism, but I think he would get a lot of push back if he tried to ban it. There is little scientific evidence to support that the MMR vaccine causes autism. Yes, incidence of autism is going up, but that could be caused by many other factors, one being that people are having children later in life. We don’t really know why autism is going up, but if it was the vaccine we should have seen a big spike in autism rates in the 1970s when the vaccine was first introduced. With regards to COVID vaccine he is opposed to young children getting it as the evidence doesn’t suggest it helps.  This is the prevailing view in Europe, so he is not alone in his thinking here. The vaccine stocks have been hit since the election, but this may be an overreaction. Older adults, especially immunocompromised ones, shouldn’t stop getting vaccines.

PWM: How might Big Pharma fare?

Pentopoulos: RFK Jr. is against pharmaceutical direct-to-consumer advertising, which is generally banned around the world.  Most consumers simply do not have the knowledge to decide which drug is best for them.  I am not sure how much it will affect pharma companies, probably somewhat but not in a major way.  It may actually make many pharma companies more profitable as they don’t have to outspend each other to try and promote their products.  The reality is it may actually impact media companies more.

He is opposed to the conflicts of interest inherent with the FDA being a revolving door with pharma.  He doesn’t want former FDA officials working for pharma.  I think this is a good idea as it reduces the potential for conflict of interest.

As I mentioned I think we are still in the noise phase with regards to RFK Jr..  There are others on Trump’s team like Vivek who are very pro pharma.  We need to see how things settle.

PWM: Do any sectors be come more or less interesting to investors?

Bio tech has become the research pipeline for pharmaceuticals. That doesn’t change. I would be more in favor of owning medical device companies; rare orphan drugs and other diseases with drugs in development to treat medical conditions that have few other options. I would not want to be invested in obesity drugs. It will be murky until early next year when we see if RFK Jr. is confirmed and what he wants to tackle. On the positive side we may see increased M&A as pharma companies redeploy some of their marketing budget to acquiring new innovative drugs.

PWM: Thank you Marc!

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The views expressed in this commentary are subject to change based on the market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance, and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

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