Challenging times ahead for US pharma following Obama win.
By Tijana Ignjatovic, Lead Analyst
9 November 2012
I am a Lead Analyst for market access and strategy at Datamonitor Healthcare. My team covers a diverse range of topics r...
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President Obama’s winning of a second term in office places further pressure on the pharma industry, with a more aggressive stance expected towards limiting drug expenditure. However, while the industry may well have fared better under challenger Romney, pharma faced hard times regardless of the outcome of the election.
With Obama’s re-election comes the promise of the new patients under Medicaid expansion and the introduction of the individual insurance mandate in 2014. Republican candidate Mitt Romney had vowed if elected to repeal the healthcare reform act, or at least amend it, although the industry remained skeptical as to whether this would effect any major change: indeed, it was Romney who introduced universal health coverage in Massachusetts, the system upon which the healthcare reform was largely based. In addition, by virtue of Romney’s loss, pharma was spared the risk of seeing the individual mandate abolished with the negotiated rebates and discounts kept, removing the upside of the health reform while keeping the downside.
Democrat support in 2008 was a smart strategic move for pharma in order to avoid the introduction of some negative measures in the healthcare reform law, including re-importation of drugs from abroad and Medicare drug price negotiations. However, there remain significant threats lurking in other healthcare reform measures, resulting in a shift in terms of political support slightly in favor of the Republicans.
The first of these is the Independent Payment Advisory Board (IPAB), a panel of healthcare experts with the remit of finding ways to contain Medicare spending. In the face of the current fiscal crisis in the US, and no signs of a decrease in healthcare spending, President Obama is likely to encourage an aggressive focus on cutting Medicare costs, and pharmaceutical expenditure is an easy target.
Mitt Romney’s promise to abolish IPAB may well be a key reason the industry came out in stronger support of the Republican candidate this time round, although there were once again doubts as to whether he would follow through. Nevertheless, many felt that Romney was more likely to appoint board members with a more favorable attitude towards pharmaceutical companies.
Even though IPAB does not have the authority to impose restrictions in terms of access to treatments, the consensus is that over time it will evolve into an organization akin to the UK’s National Institute for Health and Clinical Excellence (NICE). Many in the industry fear that by working together with the Patient-Centered Outcomes Research Institute (PCORI), IPAB will ration access to healthcare and force down drug prices, if not implement price controls. Furthermore, pharma fears that their influence may well extend beyond the public sector in the future.
Ultimately the US pharma industry faces considerable challenges in the future, regardless of who is at the helm of the country. However, the industry and the public may well get a better sense of what is to come depending on the legislators’ actions to prevent Medicare cuts under the sequestration coming into effect in January 2013. Given the current Democrat and Republican split in Congress and the Senate, bipartisan agreement will be necessary to try and address the ongoing economic problems. As a result, there may be a more concerted effort to cut costs within the healthcare system. At present US drug prices continue to rise: a stark contrast to the increasing pricing pressures seen in austerity-stricken Europe, where pharma companies have suffered shrinking sales. US drugmakers, therefore, have good reason to fear the transmission of similar cost-cutting trends over the Atlantic.