For pharma companies and insurers, the re-election of George Bush was good news. Much to their relief, it ends the threat
of legislation that would allow the federal government to directly negotiate drug prices with Medicare drug plans.
Continued GOP control of the government also will make for a smoother implementation of the Medicare prescription drug benefit
and many complex provisions in the Medicare Modernization Act (MMA). Health and Human Services (HHS) officials pushed hard
for the Medicare reform legislation and have a high stake in establishing workable regulations and policies.
Major initiatives to expand healthcare coverage to the uninsured or reform Medicaid are low priorities at the Bush White House.
Social Security and tax reform will be the administration's main domestic policy initiatives. President Bush is expected to
offer additional tax incentives for individuals and small businesses to obtain health coverage. The administration's main
strategy is to rely on private insurers and employers to make available health savings accounts and other more affordable
Not the Top of the List
Postelection polls show that healthcare was eclipsed by other issues during the presidential campaign. Only 6 percent of voters
made their Election Day choice based on health issues, while 23 percent selected a president who reflects their "moral values,"
according to a postelection survey by pollster Whit Ayres. Almost 80 percent of the voters consider healthcare issues very
important, but most are concerned more about affordability than about expanding coverage of the uninsured.
Although many elderly voters are confused about the new Medicare drug benefit and managed-care choices provided by the MMA,
seniors seem to consider the new program worth trying. Bush actually did better among elderly voters this time, and efforts
by Sen. John Kerry and Democrats to denounce the Medicare pharmacy benefit as inadequate and a giveaway to rich pharma companies
and insurers evidently did not sit well with the public; that strategy may have even cost Senate Minority Leader Tom Daschle
(D, SD) his seat. Voters complained that the presidential debate on healthcare was not specific enough and failed to offer
real solutions, a perception that hurt Democrats.
That said, rising healthcare costs and prices will draw intense scrutiny from Republicans as well as Democrats and may translate
into policies for restraining healthcare spending growth. The administration faces a record budget deficit and escalating
outlays for the Iraq war and counterterrorism as well as new Medicare benefits for more than 40 million elderly Americans.
Rolling Out the Regs
The launch of the Medicare pharmacy benefit in January 2006 will focus more public attention on drug costs, utilization and
marketing. (See "Rolling Out the Regs,") Medicare drug plans will be establishing formularies, posting negotiated prices,
promoting treatment protocols, and tracking adverse events and outcomes more thoroughly. All these actions are likely to shape
prescribing practices and utilization of new products. Although prescription drugs account for only about 12 percent of total
healthcare outlays, medical products are a growing and highly visible portion of spending.
Policy makers are under pressure to make new therapies more affordable and accessible. They will gain more clout to do so
as the government becomes the purchaser of more than half the prescription drugs used in the United States. Despite Republican
rhetoric about relying on free-market competition, the administration may find itself championing a range of cost-control
initiatives—including more flexibility in allowing imports from abroad.
While broad health reform is not on the Bush policy agenda, a number of health issues important for pharmaceutical companies
are likely to emerge. These include:
Liability reform. Stronger Republican control of the Senate could open the door for action on medical malpractice reform. Physicians have been
pressing for caps on liability awards as a way to curb soaring malpractice insurance premiums, but proposals have been stuck
in the Senate for years. During the campaign, Bush and other Republicans blamed malpractice awards for pushing up healthcare
costs, a trend that also encourages defensive medicine and costly medical procedures. A majority of voters seem to agree that
malpractice litigation raises costs, as seen in the adoption of several state referendums capping malpractice payments.