Health reform draws pharma’s support, but alarm from insurance industry

WASHINGTON Passage of the mammoth health-reform bill Sunday night by the U.S. House of Representatives is drawing guarded support from several sectors of healthcare industry, including community pharmacy providers, physician groups and the pharmaceutical industry. But the insurance industry is expressing alarm over provisions in the bill aimed at forcing insurers to cover Americans regardless of pre-existing conditions.

The bill — expected to be signed into law as early as today by President Obama — will add 32 million more Americans to the rolls of the insured, according to widely used estimates, and will cost roughly $940 billion over the next decade, the Congressional Budget Office predicted. However, those costs will be offset by cuts in Medicare payments to doctors and hospitals, and by increased taxes on Americans earning more than $250,000 a year; the result will be a net savings over the next decade of $130 billion, the CBO estimates.

For pharmacy retailers, the House bill retains some key pharmacy-friendly elements long sought by the industry [see story posted earlier today by Drug Store News online editor Allison Cerra]. Among those provisions: a higher payment formula for Medicaid prescriptions, an end to some recently imposed curbs on the sale of durable medical equipment and diabetic supplies by retail pharmacies, and new transparency requirements on pharmacy benefit management companies. The bill also would fund a series of pilot programs to demonstrate the viability of medication therapy management by pharmacists, as well as improvements to the Medicare Part D MTM benefit.

Representing the drug industry, the trade group Pharmaceutical Research and Manufacturers of America [PhRMA] issued a statement late Sunday in support of comprehensive healthcare reform and accompanying reconciliation legislation in the House. “We continue to believe that comprehensive healthcare reform will benefit patients and the future of America,” noted the group. “That’s why we…support action by the House to approve the Senate-passed bill along with the amendments found in the reconciliation legislation.

“Today’s important and historic vote in the House will help to expand health care coverage and services to tens of millions of Americans,” PhRMA added. However, noted the organization, “Our commitment to help pay for healthcare reform will require all of our companies to make some difficult choices moving forward — on top of already losing more than 150,000 jobs since 2007 because of the recession and other economic factors.”

Along those lines, PhRMA president Billy Tauzin said the group remains concerned about some aspects of the bill, “including the overly broad powers of a non-elected Independent Payment Advisory Board (IPAB), which could enact sweeping Medicare changes without action by Congress and would not be subject to judicial or administrative review.”

For pharmaceutical manufacturers, health reform will prove “a double-edged sword,” agrees The Datamonitor Group, a multi-business consulting firm. On the plus side for drug makers, the addition of tens of millions of new patients to the ranks of the insured will provide “rising revenues…as volumes increase.”

However, noted Datamonitor, the new law will impose an “immediate market dip due to imposed rebates and discounts,” as well as “cost strain on private and public payers in the long run” that “will drive [the] market down.”

Tijana Ignjatovic, strategic healthcare analyst at Datamonitor, noted that the pharmaceutical industry “will be grateful for some certainty on the future market outlook.” However, she added, “there are potential short- and long-term dangers” for drug companies.

“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,” Ignjatovic warned. “However, 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.”

Although that means short-term benefits to drug makers, added the Datamonitor analyst, “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 U.S., decreasing the overall value growth of the market.”

What’s more, noted Ignjatovic, “It cannot be ruled out that unfavorable measures such as drug re-importation and Medicare Part D price negotiations may be introduced as healthcare costs start to bite.”

Also expressing guarded support for the 2,000-page health-reform bill is the American Medical Association, along with the advocacy group Doctors for America.

“We are particularly pleased that so many patient protections go into effect immediately — including closing the Medicare part D drug program’s donut hole, eliminating the many excuses health insurance companies use to deny care and increased funding for Community Health Centers and more doctors to care for those who need it most,” noted Mandy Krauthamer Cohen, M.D., executive director of Doctors for America.

Another industry clearly affected by the outcome of the health reform debate, the insurance industry, has become increasingly leery of the reform movement as the shape of the legislation became clear and the Obama administration sharpened its attacks on insurers. Datamonitor’s Ignjatovic predicted, “With 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.”

Karen Ignagni, president and CEO of the insurance industry group America’s Health Insurance Plans, echoed those concerns in a statement. “For healthcare reform to work, everyone needs to be covered and the growth in healthcare costs must be brought under control,” she said. “Healthcare-reform legislation that does not address underlying medical costs cannot be sustained.

“Unfortunately, this legislation will drive up healthcare costs by adding billions in new healthcare taxes and encouraging people to wait until they are sick before getting insurance…which unfairly penalizes those who currently have coverage,” Ignagni added.

Among the insurance industry’s biggest concerns with the bill, she noted, are that it “lacks a system-wide approach that would actually bend the cost curve downward,” and “takes a very timid and limited approach to addressing ways to control costs and improve quality.

“The legislation needs to take bolder steps,” said AHIP’s president, “by implementing throughout the