The booming biotech industry is spilling out of Kendall Square in what looks like a flood of biblical proportions, but what happens if a Democrat takes the White House in 2020, riding a wave of demand for “Medicare for All”? 

Some investors have clearly been worried by the profusion – nine as of March – of substantial public health insurance proposals from leading Democratic politicians to expand access to health care and the general addition of “Medicare for All” to “impeachment” as a top rallying cry on the left. Heath care has consistently been the worst-performing sector of the S&P 500 so far this year, CNBC reported last week, and a leading index fund focused on the sector has only risen 4.7 percent compared to the S&P 500’s 17 percent year-to-date growth, as of early last week. 

Commercial landlords and developers in Boston hardly share these concerns, as Steve Adams reports this week.  

Boston Properties is making lab-ready products the core of their strategy in Boston’s suburbs, with nearly 600,000 square feet of lab or lab-ready space in its pipeline in Waltham alone. Longfellow Real Estate Partners was recently able to sell a lab conversion on Massachusetts Avenue in Cambridge for over $1,600 per square foot, a six-fold markup from its price in 2010. BioMed Realty bought a Cresset lab conversion in Watertown for $62.5 million in November. 

Could Democrats Dampen the Party? 

They’re smart to be so bullish. Life science absorption approached 290,000 in the first quarter while Cambridge lab vacancies have been permanently stuck below 1 percent since the middle of last year, according to Newmark Knight Frank. Massachusetts biopharma companies received $3.1 billion in venture investment in 2017 – 37 percent of all biopharma VC dollars nationwide that year – and local biopharma companies raised $2.7 billion in capital in the first half of 2018, according to the Massachusetts Biotechnology Council’s 2018 Industry Snapshot report. The number of biopharma jobs have grown 28 percent since 2008, the council added. 

The one thing that could rain on this parade would be a sharp reduction in the prices drug and device makers could charge patients and insurers for their products, something more than a few investors think could be possible under one of the many Democratic plans to expand access to affordable health care. 

Progressive plans like that offered by Sen. Bernie Sanders would put radical cost containment measures in place, like a global budget for all health expenditures in America set by the federal government as part of a health insurance plan that would cover all residents, according to a Kaiser Family Foundation analysis. These plans would also establish a formulary for medications covered by the plan that discourages those deemed ineffective, dangerous or excessively costly when better or generic alternatives are available.  

Several other, milder bills would still rely on Medicare – and its typically lower reimbursement rates for drugs and doctors – to expand access to affordable healthcare for millions of Americans. 

Pricy Treatments Need to Prove Their Value 

Even if Democrats take the White House and are able to get some version of these plans through, though, prospects are good for the local life science industry, said Ben Isgur, leader of PricewaterhouseCoopers’s Health Research Institute. 

“If we look at most of the growth of innovation right now, a larger proportion of drugs coming onto market are specialty drugs… this is where science and innovation have brought us to, that we are taking on rarer and more specialty diseases, more complicated diseases,” he said. “This will be a large part of our industry for some time to come, because that’s where the research and innovation have been.” 

Diseases like hepatitis C, which had previously only been managed with difficulty, now stand a reasonable chance of being cured. Cancer treatment, as well, is seeing a revolution, Isgur added, and in general the current state of the art should be able to continue generating remarkable cures for many ailments for some time to come. 

While many plans for expanding health care coverage need substantially more detail before their impact on the biopharma industry can be fully analyzed, he said, historically the health care industry has done better the more Americans are insured. This suggests that even with attempts by a “Medicare for All” plan to control costs, Massachusetts biopharma firms could come out ahead, even with Medicare’s historically lower reimbursement rates when compared to private insurers. 

Regardless of who wins the 2020 election, however, the health care industry is headed towards a “value-based” payment system, Isgur said.  

“The more expensive the treatment is, the more the people paying for it want to see a positive outcome,” he said. “Is that a risk? It’s a risk for companies that aren’t able to work in that environment and aren’t able to change and work in that environment.” 

This prognosis suggests Massachusetts’ life science landlords will not have to worry about any dramatic reduction in their ability to fill lab buildings for a long time to come.