As the White House and Congress battle the looming deadline to raise the country’s debt ceiling, what are the potential implications of the various debt-reduction proposals on the pharmaceutical industry?
Proposed spending cuts targeted at healthcare programs, such as Medicare and Medicaid, certainly will have an impact on healthcare providers and the healthcare system. Of particular concern for the pharmaceutical industry are proposed spending cuts in the prescription-drug benefit under Medicare Part D.
“It is extremely unfortunate that President Obama continues to push for a policy that could destabilize the successful Medicare Part D program and have a devastating effect on American jobs,” said Pharmaceutical Research and Manufacturers of America (PhRMA) Vice President Karl Uhlendor, in a PhRMA statement. “Government-imposed price controls in Part D could fundamentally alter the competitive nature of the program and threaten its success. Savings achieved in Part D are passed onto beneficiaries, contributing to the program’s success in holding costs far below projections, while achieving very high marks from seniors.”
PhRMA points to a recent PhRMA-funded report by the IMS Institute for Healthcare Informatics, which showed that on average costs for medicines in the top 10 therapeutic classes in Part D declined by more than a third between January 2006 and December 2010, from $1.50 to $1.00. IMS Institute projects that costs will continue to decline, reaching $0.65 by the end of 2015, representing a 57% decrease from 2006.
Also weighing in on the debate is the healthcare policy think tank, the Kaiser Foundation, which provided an updated side-by-side summary of changes to key Medicare provisions found in five major debt-reduction plans put forward by the White House, Congress, and independent, bipartisan commissions. The five plans, which were put forth at various times between Nov. 17, 2010 and July 19, 2011, are: the President’s Framework for Shared Prosperity and Shared Fiscal Responsibility; the House Concurrent Budget Resolution; the Senate “Gang of Six” Proposal; the National Commission on Fiscal Responsibility and Reform (Bowles-Simpson); and the Bipartisan Policy Center Debt Reduction Task Force (Domenici-Rivlin).
Whether these debt-reduction packages or others emerging from this week’s debate will make it through Congress in response to the pending debt-ceiling crisis is anyone’s guess at this point, but what is clear is that fiscal reform and its related impact on healthcare spending and drug-reimbursement levels will certainly affect the pharmaceutical industry. Whether the battle is here in the United States or abroad, national healthcare and drug-reimbursement policies affect the pharmaceutical industry.
Perhaps more important than short-term pricing effects, however, are potential influences on drug development. “Building a better mousetrap” is no longer a sufficient paradigm in drug innovation, which has to factor in the cost, pricing, and potential reimbursement of a drug. In tighter healthcare-spending environments, for example, will a new, more expensive drug for hypertension be reimbursed when an older, off-patent drug may be considered sufficient? How novel will a new drug have to be in order to be reimbursed by national governments or private insurers, and will it be worth the drug-development dollars to see? Does such an approach encourage a more sustainable healthcare environment or not? There are no easy answers for these questions, but what is clear is that drug reimbursement has become an important ingredient in drug development and commercialization.
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