In Age Of Trump, B-Schools Brace For Upheaval

Ask anyone in the business school world what 2017 will look like, and it seems the underlying question they all hear is, “What will happen with Donald Trump as president?”

Poets&Quants asked faculty and deans at the top U.S. B-schools to put on their prognosticators’ caps and divine the big developments in the year ahead, on campus, in Washington, or in the economy as whole. Not all used the opportunity to opine about the incoming Trump administration. But even those who steered clear of politics mused along the margins, making topical dips (if not dives) with their forecasts.

Following are the most interesting and informed responses from some of the top B-school minds in the country.

ON THE WEST COAST, INCLINED TO LEAD — OR LEAVE

It’s perhaps no surprise that some of the most strongly held views of the year ahead came from the West Coast, particularly the University of California-Berkeley Haas School, a bastion of progressive activism. Robert Strand, executive director and lecturer of the Center for Responsible Business at Berkeley-Haas, says the vacuum of leadership on key issues will have to be filled.

“The business community,” Strand says, “will assume a leadership role to drive greater social inclusion in society and address climate change. We simply have to.” This echoes Strand’s call in April for Berkeley to serve as the birthplace of a larger progressive movement, to “play a leadership role in helping to usher in the mainstreaming of respecting human rights in business.”

Strand’s colleague, Jennifer A. Chatman, Paul J. Cortese distinguished professor of management at Haas, offers a 2017 prediction farther to the left on the spectrum of responses to the national shift in political power: “California secedes from the United States,” she says, “and Tesla issues every family with a CA driver’s license an S or an X, depending on family size.”

IN HEALTH CARE, UPHEAVAL

Free cars and secession aside, there is wide agreement on at least one political (and business) front: Big changes are coming to the world of health care. With a Republican president and Republican majorities in the both the House and Senate, conservatives’ long-hoped-for repeal of the Affordable Care Act, President Obama’s signature domestic achievement, is almost assured

Northwestern University Kellogg School of Management Professor Craig Garthwaite, an expert on health issues who was named to the Poets&Quants 40-Under-40 in 2015, says the results of November 2016 election introduced “meaningful” economic uncertainty into an already shaky ACA landscape. But while Republicans appear to hold all the levers of power in Washington, they have been unable to articulate a way forward for the nation’s health care system.

“President-elect Trump and the leaders of the Republican majority in the House and the Senate campaigned on a promise to ‘repeal-and-replace’ the ACA,” Garthwaite says. “Now that they have found themselves on the precipice of holding control over all three branches of government, Republicans are struggling to define their actual plans for the future of the U.S. health care system. This uncertainty has rightfully frightened health care firms, including all hospitals and some insurers. These firms will sustain massive losses from any wholesale repeal of the ACA — making the continued existence of the ACA a top priority in 2017.

“The one thing that is certain is that in the first months of 2017, there will be a political battle over the law’s future that will feature unusual coalitions. After many years of castigating insurance companies for premium increases, and hospitals for high prices, supporters of the ACA will now need to depend on the political muscle of these private firms to support the law — yet again proving the old saying that ‘politics make strange bedfellows.’”

‘REPEAL WILL OCCUR WITHIN THE FIRST 100 TO 200 DAYS’

Health care is foremost on many minds as 2016 and the administration of Barack Obama come to an end. At the University of Minnesota’s Carlson School of Management, Stephen Parente, associate dean of MBA programs and one of the leading health economists in the U.S., says “repeal and replace” is now “repeal and delay,” and it’s a foregone conclusion.

“Repeal will occur within the first 100 to 200 days as budget reconciliation,” Parente says. “Budget for the actual repeal will not occur past 2018. Senate Republications will work to craft a bipartisan replacement bill working with (House Speaker) Paul Ryan’s ‘Better Way’ plan as a template. Major health insurers will return to marketplaces only if there is new re-insurance pool for exceptional high risks. The individual mandate will be repealed as part of budget reconciliation in 2017.”

While the future of the ACA is uncertain at best, Garthwaite anticipates the continued growth in prescription drug prices — which is “clearly frustrating leaders of both parties” — will almost certainly be a hotly contested issue in 2017. “The past two years have seen headlines dominated by both high drug prices and frequent price increases, such as a nearly 5,000% price increase for Daraprim and large price increases for Mylan’s EpiPen autoinjector for allergy sufferers,” says Garthwaite, who wrote about the EpiPen controversy for Crain’s Business Chicago. “In 2017, it is highly unlikely that there is political will, or even a strong economic argument, to allow for the similar re-importation of brand-name pharmaceuticals. Doing so would unwind the innovation incentives that stand at the center of the patent system and would face an unending and well-funded political challenge by the pharmaceutical industry. However, I expect to see the development of policies that address the high prices and frequent increases for generic pharmaceutical products that have long since lost their patent protection.” He cites as possible solutions increasing funding and pressure on the FDA to more quickly approve generic applications, or the passage of more far-reaching legislation to allow pharmacies to re-import generic medications that have suffered large price hikes in the U.S. market.

In any event, as it pertains to business schools, “the business of health care will continue to grow in importance to the global economy and society,” says UNC Kenan-Flagler Business School’s Brad Staats, associate professor of operations. At UNC, he and the B-school faculty “will investigate and address its challenges in collaboration with our impressive colleagues in the health sciences.”