5. US HEALTHCARE REFORM AND POLITICS
"This year will be all about healthcare reform implementation," says Matt Giegerich, Chairman and CEO of Ogilvy CommonHealth.
"The emergence of 30 million new patients—and another 30 million whose coverage will be expanded—will obviously provide pharma
with a big opportunity. Many are poor people or minorities with multiple chronic care needs."
Having pledged in negotiations over the legislation to reduce potential profits by guaranteeing $80 billion in savings over
the next decade, the industry will start delivering on specifics this year. Pharma will begin to close the donut hole by offering
a discount of 50 percent on branded drugs to seniors forced to pay out of pocket. Drugmakers will also provide 20 percent
rebates for branded drugs to people on Medicaid—and political pressure to extend these rebates to "dual eligibles" (Medicaid
recipients whose drug coverage is provided by Medicare Part D) will increase.
2011 By the Numbers
Whether the new Republican majority follows through on promises to repeal Obamacare is up in the air. Some of the most consumer-friendly
reforms have already kicked in, increasing public support. The individual mandate and its constitutionality is an issue that
will play out in the courts.
"All the political uncertainty around the healthcare bill is causing havoc for pharma," says Michael Santoro, a professor
at the Rutgers Business School. "The reality is, What can the Republicans target to cut back? The big-impact items—accountable
care organizations, electronic records—are driven by larger trends. The only thing they can argue with is coverage of the
uninsured, and even that has an economic benefit."
As the heads of committees, the Republicans have many procedural means to block rollout of the law's new initiatives, not
least by refusing to fund them. Some Republicans have pledged to devote the next two years entirely to investigations into
the Obama administration. FDA Commissioner Margaret Hamburg is expected to be summoned to Capitol Hill in the spring to discuss
the agency's oversight of pharmaceutical manufacturing plants. CMS acting director Donald Berwick, who will be implementing
the many pilot projects upon which the fee-for-outcomes model is based, is also expected for a grilling. In this way, the
GOP can stall the daily business of the two federal agencies whose predictable operations are most critical to pharma.
Two targets industry lobbyists may take aim at are the Independent Payment Advisory Board for Medicare (IPAB), whose cost-cutting
recommendations may morph into de facto price controls, and the Patient Centered Outcomes Research Institute (PCORI), the
public/private nonprofit in charge of furthering comparative effectiveness research.
Yet partisan politics is ultimately merely a sideshow. "The transformations in healthcare are market driven," says Hisey.
"We need to get front of mind the fact that Washington is only an influence in global markets. What's happening in the UK
and in China is just as important."
6. PRICING AND VALUE
In the UK and Europe, the financial crisis has unleashed new austerity measures, likely to tighten the screws on national
drug budgets. Many eyes in 2011 will be on Germany's new policy: Drugmakers will have one year to negotiate a price with insurers,
but if an agreement cannot be reached, the health ministry will step in, setting a maximum reference price. This ceiling will
likely be adopted as a benchmark in other EU markets. How long will it be before the US adopts or adapts similar measures,
turning pricing pressures into a uniform global network of price controls?
PCORI may attract industry ire and Republican fire, but industry leaders have come to accept that comparative-effectiveness
is a done deal. "Where we are with comparative effectiveness right now is where we were with safety about eight years ago,"
says Dr. Richard Gliklich, CEO of Outcome Sciences. "Pharma wants to know what the rules of the road are so that it can start
investing in the research, but there is still a great deal of uncertainty and debate about what is the best study design."
With three seats at a PCORI table of more than 20, pharma has a voice in these debates, but the inevitable influence of comparative
effectiveness on drug pricing is a source of industry anxiety.
Head-to-head trials will become an expected part of drug development in order to get payer reimbursement, if not FDA approval.
"We are going to see the start of applied comparative effectiveness in three areas: with current products and lifecycle management,
with development and launches of new products, and with the licensing of potential new products," says Hisey.
Heybroek agrees. "Pharma is going to devote more resources to becoming expert about the entire payer community," he says.
"A payer could care less about a clinical trial unless the drug shows a clinical benefit that translates directly into an
Meantime, the market will continue to gain sophistication in assessing how patients should be treated and by which regimens,
says Mike Wokasch, who blogs at
http://PharmaReform.com/. "Individual providers are already building data systems trying to correlate outcomes with treatments. We will see increasing
pressure on pharma to demonstrate the value of its products in terms of outcomes."
The FDA and CMS will also advance plans for so-called parallel reviews of new drugs for simultaneous approval and coverage.
The agency also will push drugmakers to do quality-of-life studies to evaluate the real-world benefits of new cancer drugs.