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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.

Jill Wechsler

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 coverage options.

Safety First

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.

Restraints Likely

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.

An early test for liability reform may surface in proposals to expand Project BioShield. Sponsors of legislation to boost federal support for research and development of new counterterrorism vaccines and treatments want to provide liability protections for manufacturers of products likely to be used in high-risk situations. Democrats have opposed such safeguards as a giveaway to Big Pharma, but a more conservative Senate could prevail.

Drug importing. Even though Democrats failed to parlay support for increased purchase of drugs from Canada and other Western nations into victory, the drug import campaign is not likely to die down. For both political and fiscal reasons, the White House will be looking for ways to identify "safe" foreign sources of less costly medicines. Several of the new Republican senators championed broader drug importing as one way to expand access to affordable medicines and will be seeking to fulfill their promises.

Stem cell research. The Bush victory puts on hold efforts to expand federal support for research that involves destroying human embryos. Instead, research will shift more to private and state programs. California voters approved an initiative to provide state funding for stem cell research, and other states may follow suit. Moderate Republicans in Congress hope that the California action will spur legislation to modify the Bush policy, but the President has little reason to revise his current stance.

Tax incentives. As in the past, the Bush administration will look to tax breaks and market incentives to provide more options for individuals to obtain healthcare coverage. The prime vehicle is the tax-deductible health savings account coupled with a high-deductible, lower-cost insurance plan. With most of the nation's 45 million uninsured holding jobs, Republicans want to encourage employers to broaden coverage for workers as the best way to attain universal coverage. Any great expansion of these programs, however, would be costly in terms of tax losses that could add to the budget deficit.

Jill Wechsler is Pharmaceutical Executive's Washington correspondent.