Will Healthcare Reform Pay Off?

Written by Jordan Melnick

Members of Congress are in for a hard landing when they get back from recess in early September. After four weeks at home in their districts, the debate will heat up again as they resume the arduous process of crafting the biggest piece of President Obama’s domestic agenda. With the president demanding a bill before year’s end, lawmakers cannot show any jet lag in ironing out potentially historic reform with huge implications for the pharmaceutical industry.

Before the break, things got messy. Amid partisan and even intra-party fighting, neither the House nor the Senate managed to finalize a bill, as the White House had hoped. Instead, Democrats and Republicans wrestled over several sticking points that threaten to scuttle the healthcare overhaul, a Democratic ambition as old as FDR. The disagreements include a tax on high-income earners, fines for businesses that don’t insure their workers (except very small companies) and a government insurance plan that would compete with the private sector.

On the Sidelines
Pharma has kept relatively quiet on the public plan option, even as conservatives have vociferously denounced it. Pharmaceutical Research and Manufacturers of America has not spent “a singly penny lobbying against” the measure, Senior Vice President Ken Johnson said. And PhRMA has spent a lot of pennies on Capitol Hill this year – more than $13 million, according to the Center for Responsive Politics (CRP).

Still, Johnson made it clear that he has reservations about the government jumping into the insurance business. “The problem is governments don’t negotiate prices,” he said. “They dictate prices.”

Another issue in Washington – one that has caused rifts within the Democratic majority – is the overall cost of reform, which the Congressional Budget Office has estimated at more than $1 trillion. That is a hard sell in light of the towering national debt, though Democrats say reining in Medicare spending and other measures would offset the cost.

Lawmakers have found common ground on some issues. Both parties support paying doctors and hospitals for treating patients, not merely seeing them, putting the emphasis on quality of care over quantity of procedures. Likewise, the so-called dual mandate that forbids insurers from denying anyone coverage because of pre-existing conditions while requiring almost everyone to purchase insurance has received bipartisan backing.

Most expect Congress will send a bill to the Oval Office sometime this fall. Assuming they can patch up their own differences, Democrats have enough votes to pass the legislation without a single Republican nod in either chamber. Whereas past attempts at health care reform have floundered – most notably Hillary Clinton’s in 1993 – this time seems different. For one thing, old foes of “HillaryCare,” including businesses and drug companies, have endorsed some manifestation of “ObamaCare” while pushing hard to ensure a favorable outcome.

As it often does, pharma might come away a winner. The dual mandate would force tens of millions of now uninsured Americans to buy coverage. This is not just good news for insurance companies, as the deluge of new customers would surely increase prescription drug sales. A motion to subsidize health plan purchases in insurance exchanges, regulated markets meant to control costs, might also strengthen pharma’s revenues by broadening coverage.

Watching the Proposals
But there are also proposals coming out of Capitol Hill that have the industry wary. One, being considered by the Senate, would have drug companies partially refund the government for certain medications provided under Medicare. PhRMA opposes the rebates, or “price controls,” which Johnson said were “the quickest way to choke off innovation in America.”

Another is a push to rely on comparative-effectiveness research to single out the best treatments for patients. Critics call CER intrusive, saying it sticks Uncle Sam between doctor and patient. It might also shrink the drug market by crowning certain medications king over others.

The top concern for the biotech industry is keeping biosimilars off pharmacy shelves for as long as possible. The Biotechnology Industry Organization, which, according to CRP, has lobbied Congress to the tune of $3.7 million this year, wants a 12- to 14-year window of exclusivity for innovation drugs. While allowing biosimilars into the market earlier might lower health care costs for consumers, it could also discourage companies from creating new drugs, a prohibitively expensive undertaking. Lowering costs would be “a good public policy result,” said BIO general counsel Tom Dilenge. “But you have to make sure you don’t disincentivize the investment in future innovation.”

That BIO will get what it wants, however, is not a forgone conclusion, according to Dilenge. The AARP wants generics to hit shelves earlier so its members get cheaper drugs sooner, and it has spent $9.4 million in lobbying this year to try to make that happen. It’s a shortsighted goal, in Dilenge’s opinion. “They don’t seem to be too concerned with the next cycle of innovation,” he said.

How health care reform – should it pass – will affect pharmaceutical representatives is hard to say with so much still up in the air. If the government requires the estimated 45 million people now without insurance to purchase coverage, it could mean a lot more business. On the other hand, earlier introduction of generics, Medicare rebates and an emphasis on CER could stifle pharma, limiting sales and employment opportunities. In Dilenge’s words, “It really is a jobs issue at the end of the day.”

Lawmakers have two weeks of vacation left. They should enjoy it. Fall won’t be easy.