Pharma Reform

There is plenty of discussion, debate, legal maneuvering by state governments, and media coverage dedicated to the potential repeal of healthcare reform legislation in the US.  While many feel comprehensive rejection of the bill is unlikely, others suggest there are several components of the reform legislation that should be redrafted or eliminated outright.

Without getting into all the nuances (e.g., implications of electronic health records or accountable care organizations) of the legislation, the major healthcare reform implications for the pharmaceutical industry include:

• Commitment for fees, rebates, and discounts totaling over $100 billion over 10 years
• Additional 30 million potential patients with insurance and drug coverage

Agreements and other negotiated benefits for the pharmaceutical industry:

• 12 years of data exclusivity for biologics
• No direct government negotiations on pricing
• No reimportation of less expensive drugs from foreign countries

So, for pharmaceutical companies, does it really matter if the healthcare reform bill is repealed?

To answer this you have to look beyond the next couple of years and any politically driven tweaks to the legislation that might take effect as a result of trying to pacify special interest groups, including insurance companies, advocacy groups, and state governments.  Any near-term implications don’t and won’t change the fundamental realities of where the US and global healthcare markets are trending.  These realities include:

• plenty of inexpensive generic drugs to treat many mass market diseases
• an increasingly cost conscious managed market with direct or indirect (mandatory discounts and rebates) price control tactics
• increasing market expectations for premium priced new products to deliver clinically meaningful benefits over other available therapeutic options (with sophisticated expert reviews of new treatment options)
• increasing demands for definitive pharmacoeconomic data to support the relative value of premium priced new products

Any near-term changes, repeals, or tweaks to the US healthcare reform legislation will not impact these fundamental market expectations.  Interestingly, the more the US market moves to a single payer model with increasing government involvement, the more these expectations will drive the prescription drug market.

Regardless, I believe the implications of any repeal of healthcare reform will be inconsequential in the context of the long-term business model implications for the pharmaceutical industry.  Yet, it’s scary to think about the amount of lobbying money being spent right now by big drug companies and the industry to influence this legislation.

I’m sure there are also teams of people at pharmaceutical companies right now working diligently trying to forecast and model all the permutations of legislative repeal.  While a necessary exercise (don’t want to miss an opportunity or provide Wall Street with flawed financial guidance), a laborious review could be a huge distraction and probably a waste of time in the context of what needs to be done for the long-term.

The real focus for pharmaceutical companies should be on enhancing and bolstering their discovery research.  In the end, the pharmaceutical industry and drug company success will be determined by finding better more efficient ways to deliver products that satisfy a much more demanding market that has higher expectations for therapeutic benefits and value.  mike@pharmareform.com