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Obamacare After Nov 6th: Trouble for Pharma?


Pharmaceutical Executive

No doubt the November 6th election is going to be close, very close: close for the Presidency, close for the Senate, and possibly close for the House.

No doubt the November 6th election is going to be close, very close: close for the Presidency, close for the Senate, and possibly close for the House.  So close, in fact, it’s possible that no substantial political change will occur in Washington, as a result.

That said, for the U.S. pharmaceutical industry this is not going to be an election without consequence.  Obamacare, as I see it, will continue regardless of the results.  Yes, there will be various start/stops, driven by political and legal wrangling.  But, in fact, there is little in the probable results of this election that will halt the onset of Obamacare on January 2, 2014.

So, for US Pharma, it’s time to think about some of the more important tenets of Obamacare and how, if at all, this election may impact these programs.

I am sure everyone has a few favorites, but I have chosen three that I think are extremely potent, and almost certain to continue forward.  I suggest that the Rx industry carefully review these three, no matter what happens on November 6th.

1. Accountable Care Organizations – As many of you know, the so-called Accountable Care Organizations, or ACO’s, have caused considerable market confusion since they were first introduced in 2010.  The primary concern was and is, what is an ACO?  Designed as cost cutters, the uncertainty centers on how ACO’s will actually control costs.  The one big imponderable, according to the law, is that patients are not “locked in” to any physician or system and can go to any provider they want for care, seemingly making cost containment difficult.  Therefore, it’s clear an ACO is not an HMO, a healthcare model that gained much notoriety in the past for utilizing strict “lock in” rules to control costs.  So if ACOs are not HMOs, what are they and how will they save money?  Frankly, although numerous “pilot ACOs” have been launched, and CMS has modified rules regarding ACO administration, we still don’t  know the answer to that question.

Nevertheless, in April 2012, HHS officially launched the ACO concept.  And although the actual start-ups of these entities have been slow due to the cost containment question, I would be looking for a rapid acceleration in ACO start-ups, early in 2013. Especially if President Obama wins.  Confused or not, ACOs will be pressed forward by Obama and HHS.  But if Romney wins, I also wouldn’t count out the ACO concept.  Remember “Romneycare.”   He could easily end up continuing the ACO idea, if devising a clearer cost savings guideline.  Consider this: Would Romney, given his experiences in Massachusetts, “lock in” patients to ACOs to achieve real savings?


So the question for Pharma on ACOs is what to do about the 2 million new Medicare patients who are supposed to be swept into the ACO models by 2016?  How does Pharma fit into the ACO scheme, whatever it may end up being?  Can ACO’s really operate without restricting drug access?  Does the current no “lock-in” policy for ACOs actually work in Pharma’s favor?  And how does US Pharma plan and manage for this very unclear ACO concept?  Good questions especially since, as I said, I look for ACOs to continue forward under either Obama or Romney.

2. Independent Payment Advisory Board – I think everyone understands that “IPAB” has been controversial since the day it was first presented in Obamacare.  But let’s go back to why?

It’s because its 15 non-elected bureaucrats, who are deemed “healthcare experts,” will be responsible for figuring out ways to control the annual per capita cost of all 50 million Medicare recipients.  Although simple in theory, the social enormity and potential healthcare impact of what IPAB has been designed to undertake is staggering.  As a result, the future IPAB panel has been termed everything from “medical saints” to “the death panel”.

But is IPAB a real concern to Pharma?  Yes.  For starters, no individual with current ties to the Rx industry will be allowed to sit on the IPAB panel.  The same goes for doctors, insurers, hospital admins, etc.  The panelists are to be dedicated only to IPAB service, with all other professional affiliations cut off.  The positions themselves are designed as “real” jobs – pegged at $165,000 a year – and to run for up to two consecutive six year terms.

If Obama wins, I look for very few people to be named to the board who are supportive of industry.  If Romney wins, the appointees will have a different look and feel.  But let’s be honest:  It’s sad but true that both men likely will want the panel functioning at some level since IPAB is designed to serve as a non-Congressional “hammer” on Medicare costs.  So IPAB likely will move forward and I would bet a lot that the make-up of the IPAB board is likely to be a problem for Pharma.

Second, assuming IPAB goes on line in 2013, how will it restrain expenditures?  Going after the “drug line” to restrain medical costs is certainly a tactic that both Democratic and Republican politicians have pursued for many years.  Think Medicaid and Public Health recommendations that have included all generic formularies, therapeutic substitution, “fail first” step care,  maybe even “one drug availability” per medical indication?  Right, rationing, even though “rationing” is supposedly prohibited under the law, but you get the picture.  The IPAB panel could easily recommend such approaches.

So, given the high likelihood that the Medicare budget for 2015 will require reductions to balance it, you have to believe that the next President, whether Obama or Romney, will be tempted to quickly empanel IPAB and put the group to work.

Overall, IPAB, already an industry hot button, could quietly become a very serious problem for industry soon after Nov. 6th.  If Obama wins, I would expect that we will see several appointments made to IPAB shortly after the election.  If Romney wins, again going back to his Romneycare experience, I still think it’s possible he could move IPAB forward, too.

3. The Patient Centered Outcomes Research Institute – “PCORI” is part of the Obamacare law dedicated to undertaking extensive comparative effectiveness research (CER).  It defines “comparative clinical effectiveness research” as research that evaluates and compares the patient health outcomes and benefits of two or more medical treatments or services.


What is PCORI research supposed to do?  Initially, the primary job of PCORI is to feed its findings and recommended prioritizations into IPAB – and IPAB is to use these recommendations as its basis for maintaining and/or lowering Medicare costs.  In the future, I would look for PCORI to expand its influence beyond IPAB.

What’s the status of PCORI?  Well, unlike ACOs and IPAB, PCORI is very much a going concern.  Staffed since 2010, PCORI has a rapidly growing budget ($50 million in 2011; $150 million in 2012) and recently issued its first set of priorities for American medicine. They are:

1. Assessment of Prevention, Diagnosis, and Treatment Options - Comparing the

effectiveness and safety of alternative prevention, diagnosis, and treatment options to

see which ones work best for different people with a particular health problem.

2. Improving Healthcare Systems - Comparing health system-level approaches to

improving access, supporting patient self-care, innovative use of health information

technology, coordinating care for complex conditions, and deploying workforce


3. Communication and Dissemination Research - Comparing approaches to providing

comparative effectiveness research information and supporting shared decision-making

between patients and their providers.

4. Addressing Disparities - Identifying potential differences in prevention, diagnosis or

treatment effectiveness, or preferred clinical outcomes across patient populations and

the healthcare required to achieve best outcomes in each population.

5. Accelerating Patient-Centered Outcomes Research and Methodological Research -

Improving the nation’s capacity to conduct patient-centered outcomes research, by

building data infrastructure, improving analytic methods, and training researchers,

patients and other stakeholders to participate in this research.

Although there are only five “priorities” listed here, I don’t think you have to be much of a healthcare expert to understand that PCORI is carving out a mandate for itself that reaches into virtually every aspect of American medicine.  US Pharma, therefore, will very likely be a major center of interest in any PCORI recommendation to IPAB.

And regarding Pharma, what will PCORI be looking at?  Although PCORI staffers have repeatedly said they will not be making cost-based recommendations, few believe them.  With that in mind, here are a few guesses:  “The cost justification for apparent outcomes”; “The social value of a prescribed drug versus the seriousness of the disease treated”; “The need for and access to a prescribed drug in different communities around the country versus cost”, etc., etc.

And so, with PCORI very much on track, what are the concerns for US Pharma prior to this election?   Frankly, I would think timing.  To date, I think only the November election has contained PCORI’s public activities.  Once the election is over, I look for PCORI diktats to be rapidly fed into the IPAB apparatus.  Clearly, whoever is President may be able to shape some of the final CER recommendations PCORI puts out, but as noted, this machine is running very smoothly right now.  I look for them to start issuing the results of their CER work very soon.  And I can’t help but believe that a lot of whatever PCORI determines is going to be unpleasant news for the Rx business.

In sum, these three areas of Obamacare are very likely bound for rapid, substantial action no matter who wins on November 6th.  Indeed, the three bureaucracies noted here are currently well funded and are being  administered by robust, dedicated staffs.  Therefore, Nov. 7th could well turn out to be the official starting point for the full-on launch of the ACO, IPAB, and PCORI concepts in Obamacare, and that that could be serious trouble for US Pharma.

Those are my thoughts on Obamacare and the November 6th election.  I look forward to hearing from you with you thinking on this matter.

Tom Norton is Principal, NHD Smart Communications of Illinois, Inc. He can be reached at tnorton@nhdcomm.com.

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