After reading statements, articles or posts from the Wall Street Journal, Reuters, Seeking Alpha, Christian Science Monitor, Generic Pharmaceutical Association, Bio, PhRMA, Pharma Reform and BioJobBlog to name a few - what can we conclude about the recent Health Care Reform Bill?
Everybody got something they like and everyone got something that they don't like - i.e. half a loaf! Welcome to America in 2010. Given the politically fractious nature of the Nation at the moment, this is not particularly surprising - at least not to me.
The Reuter's piece above does a good job of listing out the winners and losers among the various healthcare constituencies - hospitals, other service providers, insurance, medical devices, etc.
Let's focus our attention on the drug manufacturers - Big Pharma, Generic Manufacturers and Biotech. Again each of these groups had something to like and something they didn't like in this bill. Most analysts that I've read have concluded that Big Pharma and Biotech in particular came out ahead of the game overall.
Big Pharma agreed to pay $85 M in rebates over the next 10 years - but will have 32 million more insured to target for future sales. Deeper price cuts were removed from the Medicare program. The government will pay for another 25% toward discounts. PhRMA already is warning that we need to be vigilant against potentially sweeping powers of the Independent Payment Advisory Board (IPAB) to help protect industry against possible future Medicare price changes by this unelected body.
Generic manufacturers will also benefit from the 32 million additional customers and the Medicare pricing provisions - where Medicare retained a 75% discount on generics (compared to 50% for brand name). Generic drugs are expected to become the mainstay of prescription drug plans (according to the GPhA they already account for 74% of prescriptions in the US but consitute only 22% of the cost - need we say more about some of the motivations for this legislation). The Goverment is expected to push generics.
Biological drugs will receive a 12 year exclusionary period before they can competition from biosimilars - in some cases the exclusionary period could even extend past the patent life of the drug. This is a big boon to biotech and those biotech's increasingly being owned by Big Pharma. This does not sit well with generics manufacturers who were seeking a shorter 5-7 yr exclusionary period. Bio lauds this provision as a watershed (1st pathway to biosimilars) that will save taxpayers 10's of billions in the coming years. The GPhA regards this as "a biogeneric pathway in name only" and states this is bad news for consumers - as the bill fails to instill competition in this area and limits patient access as a result.
According to the Seeking Alpha piece this bill will help, in particular, companies like Merck, Pfizer and Amgen as there will be more customers for their higher priced prescriptions and the extra exclusionary period will provide some degree of market protection for their protein-based drugs. Teva is named as a potential big winner coming from the generics side of the aisle.
Now the real fun begins as the legal wrangling between the Attorneys General of up to 14 (at last count) States are preparing to file suit against the Federal Goverment contesting the constitutionality of this Bill - as soon as the President signs it into law. This may be nearly as much fun as the hanging chad election. Can't we all just get along.
Posted by Bruce Lehr March 23rd 2010.