Obamacare, Innovation and Pricing

Dec 01, 2012


Jill Wechsler
The re-election of President Barack Obama means an end to threats to dismantle the Affordable Care Act (ACA) and an opportunity to demonstrate that reform will expand coverage for the uninsured. Healthcare policy was a key point of dispute during the election campaign, marked by promises of better care and predictions of soaring costs by both candidates. Now the Obama administration is under pressure to implement the ACA as expeditiously as possible to establish insurance exchanges and new reimbursement models that will provide quality care at lower cost.

The election result avoids a wholesale change in leadership for the Department of Health and Human Services (HHS), the Food and Drug Administration (FDA), and other federal agencies, but many top administration appointees may move on to other roles. House Republicans will continue to question various ACA requirements, and more legal challenges will surface in federal courts. But key provisions for pharmaceutical companies, such as rebates on drugs for seniors in the Medicare Part D coverage gap and authorization of a pathway for biosimilars, are unlikely to change.

Taxes and spending

Despite the importance of implementing health reform, the immediate priority for the administration and Congress is to tackle the so-called "fiscal cliff," as nearly $500 billion in tax increases and spending cuts are scheduled to kick in January 1, 2013 under a budget sequestration process. With Republicans maintaining tight control over the House of Representatives but losing ground in the Senate, much depends on the ability of President Obama to engineer some kind of compromise. A likely strategy is to agree now to raise the federal debt ceiling and to postpone serious debate on a more comprehensive budget plan until next spring.

Executives at biopharmaceutical companies are watching closely at how tax and budget proposals will affect their finances and the investment climate for biomedical R&D, as well as funding for healthcare programs, FDA, and NIH. The business community has pressed for corporate tax reform to make US firms more competitive globally and seek to head off broad tax hikes as a threat to investment and growth. Sharp spending cuts, however, would limit reimbursement for medical products and curb funding for research and efficient regulatory programs. Where a company stands on specific tax and spending options may depend on its recent profit and loss history, corporate structure, sales to public health programs, and overseas business operations. Pharma companies that rely more on sales to Medicare and Medicaid may prefer across-the-board budget sequestration than cuts in entitlement programs.