Pharma Cheers Health Reform Legislation

After months of increasingly rancorous debate, the House finally approved legislation March 21 that makes significant changes in the nation’s health care system. The Senate is slated to approve the House-passed changes to its original reform bill shortly.

Of most importance to pharmaceutical companies, the legislation promises to significantly expand the number of Americans with some kind of health care coverage. This will enlarge the market for prescription drugs and moderate pressures for price controls. The legislation sets up a scheme to eliminate the confusing and contentious “doughnut hole” in the Medicare program, while avoiding proposals for government negotiation of Medicare drug prices. Drug reimportation is off the table, at least for the moment.

A major plus for pharma is that the bill establishes a clear pathway for authorizing follow-on biologics. Brand-name firms won a 12-year data exclusivity period, despite loud protests from generics makers. But all manufacturers are likely to benefit from clearer policies on how to proceed in developing and regulating “biosimilars” and “biobetters.”

Pharmaceutical companies will finance the high cost of reform by paying additional fees and higher Medicaid rebates. Fees based on a company’s share of market are slated to total $28 billion over ten years, starting at $2.5 billion in 2011. The Medicaid rebate also increases from 15% to 23%.

The legislation reshapes the health insurance market as well as government health care programs, all promising to impact the coverage and delivery of prescription drugs. Implementation will be a huge challenge, especially for state governments. Republicans, as well as various interest groups, are already looking for revisions and challenges. We will examine these issues more fully in the next issue of Applied Clinical Trials.