Historic US reforms favour pharma – for now at least
pharmafile | April 1, 2010 | Feature | Sales and Marketing | Obama, US healthcare
The industry will be grateful for some certainty on the future market outlook and, overall, there is a strong belief that the pharmaceutical industry will benefit from the reform.
However, whilst many factors will determine the financial impact of proposed US healthcare reform on the branded pharmaceutical industry, Datamonitor believes that there are potential short and long-term dangers. In the short-term, it is likely that imposed discounts and rebates, in addition to raised industry fees will lead to a market dip.
This couldn’t come at a worse time for an industry facing patent expiries in 2011 that are set to wipe tens of billions of dollars off annual revenue. But from 2015 onwards, these negative effects will be offset as revenues begin to rise, driven mainly by the increase in the number of insured people and the resulting increase in drug consumption.
This will be beneficial in the medium-term, but greater government participation in provision of healthcare will inevitably ensue. In addition, growing cost strain on both public and private payers will lead to increased negative pressures on the pharmaceutical industry in the US, decreasing the overall value growth of the market.
It cannot be ruled out that unfavourable measures such as drug re-importation and Medicare Part D price negotiations may be introduced as healthcare costs start to bite. Generic providers will also be questioning the benefits of the reform, despite a highly favourable outlook at the beginning of the process and President Obama’s pro-generics stance.
Although the promise of higher sales volume from more insured patients and growing cost-containment pressures will be seen as a great positive, the 12 years exclusivity given to branded biologics, which is substantially longer than the usual five years given to small molecule drugs, will be a concern.
Due to the introduction of a ban on refusal of insurance coverage for pre-existing conditions and removal of annual or lifetime coverage limits, the health insurance industry will be hit hard by reform, with its profitability in jeopardy despite the increase in the number of customers.
Generic firms give mixed reaction
The US generics industry greeted the reforms with mixed emotions. The Generic Pharmaceutical Association’s (GPhA) president and chief executive Kathleen Jaeger said the bill provided “both good and bad news for consumers”.
She added: “The good news is that more Americans will have healthcare coverage and more seniors will have access to generic medicines, thanks to a fix to the so-called doughnut hole. GPhA is pleased that the House has taken these steps to close the Medicare drug coverage gap and has eliminated the patent settlement provision that would have had the unintended consequence of delaying generic access.
“The bad news is that the bill provides a biogeneric pathway in name only, giving false hope to patients who desperately need access to life-saving biogeneric medicines. Simply put, the bill fails to infuse competition and choice into the healthcare system due to the excessive and unprecedented market exclusivity protections for the brand industry. Until the brand evergreen loophole is closed and the indefinite brand biologic monopolies are addressed, our healthcare system will not see true savings from biogenerics for decades. This is a very unfortunate missed opportunity that poses significant exposure to the sustainability of private and public pharmaceutical coverage programmes.
In sum, while the FDA has been given the flexibility to create a workable biogenerics approval pathway, the fact is that the brand market exclusivity protections in this bill – which supplement the robust, rich patent protection of these brand biologics – will keep affordable biogeneric medicines from patients for decades to come.”
Patent settlements
On the elimination of the patent settlement ban from the pending House health reform bill: “It is our understanding that the healthcare reform no longer contains a ban on patent settlements. If true, that’s good news for American consumers who are increasingly turning to generic medicines to improve their health at affordable costs. Given that generics save the healthcare system one billion dollars every three days, there is no doubt that increasing access to affordable generic medicines will significantly reduce our nation’s overall health care costs.”
The generics group says such deals are ‘pro-consumer’ as they allow generic competition sooner than if the generic firm had taken the case to court and and lost.
Reforms haven’t gone far enough
Some groups say the legislation is a missed opportunity for greater reform. Obama had initially championed the so-called ‘public option’ in which the government would offer health insurance direct to citizens, but this proposal attracted the greatest vitriol, with some fearing a ‘government takeover’ of healthcare. A pressure group of doctors called ‘Physicians for a National Health Program’ is just one of the groups which says the reforms have failed to fundamentally alter the system.
“Only a single-payer plan can assure truly universal, comprehensive and affordable care to all. By replacing the private insurers with a streamlined system of public financing, our nation could save $400 billion annually in unnecessary, wasteful administrative costs. That’s enough to cover all the uninsured and to upgrade everyone else’s coverage without having to increase overall US health spending by one penny.”
Tijana Ignjatovic is strategic healthcare analyst at Datamonitor
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