Access: a mixed picture
As depicted in Figure 1, the demographics of the ACA indicate that the offer of expanded health coverage doesn't necessarily
imply there will be better drug coverage for all. In contrast to the straightforward objective of the Part D legislation,
the ACA has multiple goals and hundreds of moving parts. For some of those previously uninsured, the expansion of Medicaid
will certainly provide new prescription coverage. Similarly, the Individual and Small Business Exchanges (SHOP) will mean
that patients have access to medicines.
But the real question is how good will their access be to healthcare professionals? For many newly covered patients, the quality
of drug coverage will likely exceed the quality—and the commitment—of the network of physicians available to treat them. There
is already a crisis in many states with large Medicaid programs in terms of the number of primary care physicians able to
make room for new Medicaid patients. In addition, how long will it take a newly covered patient to obtain an appointment with
a specialist neurologist, rheumatologist, or gastroenterologist? The daunting numbers threaten to sidetrack the law's goal
of improving the standard of care for millions of patients with MS, rheumatoid arthritis, and hepatitis C—each on its own
a serious public health threat.
On the downside, ACA may ultimately lead to a diminished quality of drug coverage for many commercial patients who will be
"dumped" by their employers from rich, defined benefits to less costly health options operated by third parties. For the industry,
a move away from commercial, employer-based coverage to either Medicare Part D plans or the reform law's exchanges will have
two major impacts on volume and profit margin. First, Part D and exchange plans are likely to have more bargaining power than
most commercial insurers, as they are more willing and able to restrict their formularies to only those manufacturers and
products willing to discount heavily and provide "price protection." Second, either of these alternatives will likely preclude
the patient from getting co-pay offset support. And high deductibles and co-pays, with no co-pay offset cards allowed, will
lead to substantially higher patient abandonment and reduced adherence.
Therapeutic Class: It Depends
As seen in Figure 2, expanded health coverage does not carry the same upside potential for all branded products and therapeutic
classes. For some primary care classes, such as pain, depression, and hypertension, where there are multiple generic alternatives,
new patient coverage could lead to very limited new branded prescription activity. If the new payers do not block the branded
drug entirely, their benefit designs are likely to look like Part D, where there is a dramatic co-pay differential between
branded and generic drugs. And even if the branded drugs are contracted to get on preferred (Tier 2) formulary status, many
prescribers—be they physicians or physicians assistants—are likely to write "generics first" even when that step is not required.
Companies with products in these classes should look to their own experience in Massachusetts in 2007, after the Access to
Affordable, Quality, Accountable Health Care Act (now known as "Romneycare") was implemented. Did their brands grow, or did
generic share grow faster than in the rest of the country? We have seen this movie already.
For specialty products, which have high annual costs per patient and which are driving drug spending trends among employers,
insurers, and PBMs in the commercial channel, manufacturers should anticipate little growth and possibly a decline in volume
depending on whether patients are allowed to use co-pay cards to offset large deductibles and monthly out-of-pocket expenses.
A drug like Enbrel has achieved very high patient adherence with pay-no-more-than $10 programs (PNMT) for new and continuing
patients. Those newly insured patients that do find their way into a specialty physician's office may find themselves facing
prohibitively high co-pays that are comparable to Part D's specialty tier (at a $300 per month average). Potential beneficiaries
in specialty products will be those that have a physician-administered protocol such as Remicade and Orencia in the rheumatoid
arthritis space and can be billed under "medical" reimbursement codes.
Products or product classes that have no real generic or biosimilar alternative today, however, are likely to see a boost
from ACA. In the GLP-1s for example, newly insured patients can't be stepped through a generic and if the formulary includes
the therapeutic class at all, manufacturers will get their fair share of new patient starts. Products like Victoza may get
even more than their fair share, as they are likely to be "must haves" on any exchange formulary. Whether new insurance coverage
comes from the exchanges or Medicaid expansion, manufacturers in these classes stand to gain volume, albeit at lower margins.
And the newer products or launch products should have reasonable gross margins because they have not yet accumulated significant
CPI penalties to add on top of the statutory Medicaid discount.