After much ado, the US House of Representatives passed a healthcare-reform bill this weekend. Drugmakers and commentators are understandably eager to parse the bill to find out what it would mean for the pharmaceutical and biopharmaceutical industries. So what’s the verdict?
At first blush, it looks like drugmakers took a beating. The New York Times said that the drug industry receives “harsh treatment” in the bill. In June 2009, President Obama and the Pharmaceutical Research and Manufacturers of America (PhRMA) agreed that the industry would provide $80 billion in rebates and discounts on branded pharmaceuticals over 10 years. The House bill would require drugmakers to provide another $60 billion in rebates over the same period, making a total of $140 billion in concessions.
These rebates might have been what Ken Johnson, PhRMA’s senior vice-president, had in mind when he said in a press release that the House bill would kill tens of thousands of jobs in the pharmaceutical industry. Yet the additional rebates might not be included in the healthcare-reform bill that the Senate eventually passes.
The House bill also would enable the government to negotiate the prices that Medicare pays for drugs, a policy that the industry has so far opposed. On the other hand, the bill would not allow Medicare to create a formulary. This omission essentially vitiates Medicare’s price-negotiating power, said Steven D. Findlay, senior health-policy analyst of Consumers Union, in the New York Times article.
Ultimately, I think it’s too soon to draw conclusions about what healthcare-reform legislation will mean for the pharmaceutical industry. The Senate has yet to pass its own version of the bill. The Senate bill might not, for example, require the additional rebates from the industry that the House bill does. It might, as the House bill does, give biologics protection from generic competition for 12 years. And after the Senate passes its bill, it will have to be reconciled with the House bill.
Despite its initial alarm, PhRMA seems determined to withhold its judgment. “This is a three-act play, and a good critic doesn’t write a review after the opening scenes,” said Johnson in the press release. Time will tell what shape the final legislation takes. It is at least conceivable that the industry could gain from healthcare reform. The law that Obama finally signs could expand the industry’s market, increase drug sales, and provide incentives for innovation.