A New Health System for Patients and Providers, Same Focus for Pharma
Though lawmakers lately have been grappling with the so-called "fiscal cliff," we can’t forget about the Affordable Care Act (ACA) and its impact on pharmaceutical companies. Originally published on pharmaphorum.com, Doug Weinbrenner discusses the US health system following Obama’s re-election, and looks at what it means for pharma.
United States President Barack Obama has been re-elected, and the Democratic Party continues to hold the majority in the US Senate. Today it is clear: the Affordable Care Act (ACA) will continue to be a reality in the US health system.
Obama originally signed the ACA into law in March 2010, and the US Supreme Court upheld it in June 2012. So pharmaceutical companies have had some time since the bill’s ideological inception, allowing them to find their footing in this new era of health delivery.
Even though this is the single largest piece of legislation governing our nation’s healthcare system, within all 906 pages of the ACA, there are just a few ordinances directly impacting the pharmaceutical industry, including:
- The fifth reauthorization of the Prescription Drug User Fee Act (PDUFA-V) for greater patient access to new medicines through enhancing the FDA’s regulatory capacity and strengthening safety standards.
- The gradual increase of coverage within Medicare Part D to close the coverage gap, "doughnut hole," that exists between the initial coverage limit and the program’s current threshold by 2020.
- Larger rebates in the Medicaid Drug Rebate Program, which is a partnership between Centers for Medicare & Medicaid Services (CMS), state Medicaid agencies, and participating drug manufacturers, to help to offset the federal and state costs of most Medicaid outpatient prescriptions.
Aside from those, there really isn’t much within the ACA that addresses the pharmaceutical industry directly. However, there is plenty within it that impacts the pipelines that come to and from pharmaceutical companies. The heart of the legislation is reimagining and reshaping managed care, which is pharma’s most influential customer segment. It is bound to cause a ripple effect that will impact healthcare providers and drug and medical manufacturers and their respective positions within industry partnerships.
33 million new patients will enter the pharma pipeline for drugs and medical products"
Whichever way you slice this massive piece of legislation — and it has been sliced in almost every conceivable fashion — the net impact on the pharmaceutical industry is equalized.
On one hand, starting in 2014 when the reform becomes a reality, 33 million new patients will enter the pharma pipeline for drugs and medical products through state-level expanded Medicaid programs and newly established health insurance exchanges. However, Moody’s Investors Service analysts estimate that any increased revenue from the expanded patient pool will be almost entirely offset by nearly $85 billion in fees and rebates that healthcare companies have agreed to pay over the next 10 years to help fund the plan for the uninsured.
These forecasts are compounded by the shrinking pipeline of mass-market therapies, most of which are now off-patent. Some companies have successfully expanded their focus on rare disease therapies and offset the disproportionate research and development investment in small customer pools by passing the costs to private insurance companies and public / government insurance programs. This, in turn, causes the insurance entities to raise premiums to absorb the passed-on costs.
However, the ACA has established the 80 / 20 Rule, which mandates that insurance companies must spend at least 80 cents on the dollar of their premium revenue on "healthcare or improvements to care." On top of that, they now have to petition states if they want to raise premiums by more than 10%. With their ability to raise premiums limited, getting more people insured will be key for insurance, and inventing new medicines to replace the pipeline of formerly patented brands will be key for drug companies.
This is just a high-level analysis off the dueling, yet mostly neutralizing, realities within and between industries. Behind all of the complexities and lingering unknowns, one thing is for certain: Drug companies can no longer do what they have always done and expect to get what they’ve always received. The rise of the e-patient movement was the first to send distress signals throughout the pharmaceutical industry that insulated and isolated models of business were slowly becoming ineffectual. Now the reform brought by the ACA is turning up the magnification on that.
"Drug companies can no longer do what they have always done and expect to get what they’ve always received."
According to recent research from WG Consulting and Penn Schoen Berland, among all stakeholders — pharma companies, payers and physicians — opinions are almost evenly split on whether they think it is pharma’s job to help with ACA implementation.
The research also found that although about 84% of pharmaceutical companies say they are somewhat or very closely following news on the ACA, only about 25% are taking any actions to assist payers and physicians in adapting to the new healthcare reforms. The findings state that payers and providers believe controlling costs is the most important action the pharmaceutical industry can take to help them successfully maneuver within the reform and, in turn, help the 33 million newly insured.
Pharmaceutical companies need to become deeply invested in understanding what health payers, providers and patients need from them in order to further minimize inefficient and ineffective delivery models. For instance, in most health plans, half of the medical costs are attributable to less than 10% of patients — many of whom suffer from late-stage or multiple chronic diseases. Pharmaceutical companies can play a key role in improving this ratio by making greater investments in preventative health and addressing risk factors, staving off the advancement of costly chronic diseases.
At the heart of all these new internal and external industry transformations is one common catalyst: the patient. Some argue that it was the power of patient advocacy organizations and the collective voice of online patient influencers (i.e., e-patients) that gave rise to the ACA and ultimately helped it pass. In an attempt to keep the patient at the center of the reform, the ACA authorized the new Patient-Centered Outcomes Research Institute (PCORI) to encourage more comparative effectiveness research.
"…opinions are almost evenly split on whether they think it is pharma’s job to help with ACA implementation."
The PCORI has a 19-member board of directors comprised of patients, physicians, and nurses; drug and device manufacturers; insurers and payers; government health officials; and private health experts. Their collective goal is straightforward: to examine the relative health outcomes, clinical effectiveness, and appropriateness of new and existing treatments. Though their findings can’t dictate coverage or reimbursement, their research will be a bellwether for public organizations and private companies.
The 2012 presidential election confirmed the fate of ACA. According to Dr. Kavita Patel, M.D., Brookings Institution Managing Director for Clinical Transformation and Delivery, "It doesn’t matter if you are a red state or a blue state. In 2014, health insurance exchanges are going up around the country." Millions of newly insured patients will need a tour guide in this journey.
To that point, Dr. Patel adds, "The patient is the trend of the future … Whoever can emerge as a trusted voice or figure — be it a pharmaceutical company, a hospital, an insurance company or a social media company — that role is going to be not only where the money is, but what sets apart winners and losers in this new era of healthcare."