It will not have escaped the notice of most readers of this site that biopharma stocks have been up strongly since the election. I don’t recall anyone predicting that, but (like most predictions) it works pretty well in hindsight. I think that investors are betting on new corporate tax laws that will make it easier for the larger companies to repatriate foreign earnings, which can then be used for US operations. And one of the things one might do with this cash, if one is a large enough drug company to have significant offshore earnings piled up, is to start acquiring smaller companies.
That would seem one likely reason for the market’s behavior, and another one might be the expectation of a rather more tolerant FDA. I’m not sure where that one is coming from, other than a general feeling of “Hey, Trump’s a crazy laissez-faire guy and knows nothing about drug approvals”. The second half of that statement is surely true (although it’s just one tiny item in a very roomy duffel bag), but I don’t think that the first is. Remember, the guy comes from a real estate development background, which is not exactly a wild free market situation. In a big city, there are a finite number of places to build new buildings, and an even more bounded number of places where you really want to build a new building. Being able to realize a large project like that takes not only a willing seller and plenty of money, it also takes the time, money, and experience to navigate through what can be a maze of applications, permits, statements, filings, hearings, and negotiations with a whole list of government agencies and non-government interests.
The real estate background goes a long way towards explaining what seem to be two key parts of Trump’s worldview: everything is transactional, and everything is zero-sum. The world, in this picture, is made of of deals, nothing but deals, and in these deals someone has to win and someone has to lose. There’s no other way. Trump’s statements on trade and the economy, as far as I can tell, all spring from these ideas. This all makes some sense for a real estate developer, but doesn’t necessarily apply as well to other fields of human action.
So, insofar as he thinks about the situation at all – and he has plenty more to think about – Trump would probably look on drug regulation and drug approvals as similar to the real estate market. It’s like a building permit – you want to put up something on this spot, you go to the agency that tells you whether you can do it or not. (In real estate, you spend the money after that part, and in drug research you spend it before, but that just tells you that the real estate business makes more sense, right?) And those FDA approvals, if seen through the goggles of zero-sum deal-making, are not about science, because nothing is. You can’t evaluate whether one particular real-estate proposal is “more efficacious” than another one, not to any objective standard, nor whether it’s “safer” for the city or its economy. These considerations really don’t come in – did you get the approvals, or not? Do you have the financing, or not? Do you have the contractors lined up, or not? And so on.
So the sort of FDA commissioner, and the sort of FDA, that a Trump administration wants might be hard for many of us to get our heads around. But rather than speculate on in that way, I’d like to bring up a much more likely possibility: that this is so far down the new administration’s list of priorities that they’d just be looking for someone reasonably reliable who won’t screw things up and turn the agency and its actions into a liability. This administration has an awful lot of spots to fill and a steep learning curve, and honestly, I don’t think that the FDA commissioner’s job, and FDA policy in general, will be priorities. Not for some time. We may well be revisiting this issue later on, but for now, I can’t imagine much in the way of big changes. The counterargument to that is that it’s very hard, at this early stage, to predict what the incoming administration might do – and that really makes you wonder about the market going up. Don’t markets hate uncertainty? Might investors just as suddenly decide that none of these reasons are as solid as they look?
But overall, the here-comes-the-cash rationale for the biopharma run-up, then, might well be rational. (Is it going to be a good thing? Totally separate question.) But betting on a different kind of FDA seems to be premature. If I were putting money down on it, and since I work in this industry, I am, I’d bet that things are going to go on in about the way that they are now, for better or worse.
Bonus liberal arts moment – feel free to skip! It’s just that after writing about what’s going through Donald Trump’s head, I feel the need for something completely different, as the Monty Python guys used to put it. My thought that the FDA might be so far down Trump’s list of priorities that he won’t pay attention to it recalls Randall Jarrell’s excellent discussion of Robert Frost’s poem “Design“. Frost recounts seeing, early in the morning, a spider sitting on the top of a white flower, holding up the wings of a recently consumed moth. He’s actually shaken by the sight, since it looks to him like a crude, blasphemous burlesque of a religious ritual. The poem ends:
What had that flower to do with being white,
The wayside blue and innocent heal-all?
What brought the kindred spider to that height,
Then steered the white moth thither in the night?
What but design of darkness to appall?
— If design govern in a thing so small.
As Jarrell points out, that last line is a stinger indeed (and it shows the remarkable compression of meaning that the best poetry can provide). Frost has spent the whole short poem describing the scene and its uneasy contradictions. He wonders, if God’s eye is indeed on the sparrow, why he would arrange such a sight? If Nature is indeed evidence of a Design wrought by a divine hand, what does one say about a Divinity who sets up ugly jokes like this one?
This is the problem of theodicy. People have asked themselves the exact same question while standing next to concentration camps and terrorist explosions. One such event, the Lisbon earthquake of 1755, helped to charge up the Enlightenment: the spectacle of the most God-fearing city in Europe being hit on the morning of All Saint’s Day by a massive earthquake (between 8.5 and 9.0 by modern estimates), set on fire, and then having the flames extinguished (well, partially extinguished) by a tsunami was indeed hard to explain in terms of a just and loving God.
But Frost has something even more unsettling in mind. Maybe, he says, Design isn’t even at work here. This could have been just an accident, taking place below the level that a Deity would bother about. But don’t look for comfort in that, though: the unspoken implication is that all of human affairs, when seen from the Divine level, might also be below the threshold of notice. Theologically, an indifferent God is rather a poisonous concept, because indifference is hard to distinguish from nonexistence.
Going from a flower and a spider to such topics makes me think of fractal recursion, the near-repetition of a given motif across a huge range of scaling. Tiny Mandelbrot-set shapes appear in the boiling mathematical froth that comes off the edges of larger Mandelbrots, which are themselves motes off the edges of still larger ones. A brief glance at a flower leads to thoughts about the nature and existence of God (William Blake knew this too). Perhaps that’s a way out of Frost’s second dilemma – there may be no scale small enough to escape notice, because the same issues are present in all of them. A religious person might well say so, but a religious person would already see evidence of such notice being paid at our own scale, and wouldn’t need such a rationalization in the first place. Would they?