The United States: A bureaucratic muddle
It is already evident that 2013 will not create much structural clarity around reform. Some 32 of the 50 states have either
refused or delayed action on setting up the health exchanges that are designed to help the uninsured obtain subsidized coverage,
which means Washington will have to step in and manage the process—meaning big delays, especially because there are no funds
in the reform law to help the federal government expedite this task. The June 2012 ruling by the Supreme Court to uphold the
constitutionality of key elements of the ACA also bars Washington from withholding the federal contribution to Medicaid in
those states that refuse to accept subsidizing the large numbers of new Medicaid-eligible patients under the law. This subverts
a key plank in the drive toward universal coverage.
2013 by the Numbers
What is clear is that execution of the ACA will significantly raise federal and state expenditures on health while doing virtually
nothing to reduce costs for the system overall. It is probable too that Big Pharma will have to pony up more of the bill.
The annual fee the brand name industry must pay, in the form of individual company assessments based on revenues, rises from
$2.8 billion this year to $3 billion in 2014 and then to $4.1 billion in 2018. There is also the 50 percent discount manufacturers
will pay, beginning this year, to help close the "doughnut hole" for Medicare patients facing loss of drug coverage, as their
out-of-pocket costs rise.
And, of course, there are potential new financial burdens on Big Pharma as part of the ongoing negotiations to reduce the
federal deficit, the biggest of which is extension of the 23.1 percent rebate for drugs paid for through Medicaid to all low-income
eligible patients on Medicare. Reduction of the 12 years of data exclusivity for biologics to seven years, and even removal
of the tax deductibility of promotional spend are on the table. There is also the indirect impact of major cuts to the budgets
of key agencies like the FDA and the National Institutes of Health.
The IPAB show
The irony is that, while the industry may succeed in its insistent messaging to prevent Medicare from assuming the power to
negotiate down drug prices, advocates of controls could eventually achieve the same outcome, not only with these initiatives
but also if the ACA's new health spending review panel, the Independent Payment Advisory Board (IPAB), moves forward on schedule
this year, with nomination of its 15 members by the President. IPAB, assuming it becomes functional—still a big if—is charged
with responsibility to keep Medicare spending within a pre-determined per capita growth rate; if growth exceeds this rate,
it must introduce specific cuts to bring it back in line, subject only to a congressional veto. Ludicrously, under the ACA,
IPAB cannot consider any reductions to Medicare beneficiaries directly or in Part A hospital charges—meaning that what is
left are doctor bills…and drugs.