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Analysis: Drugmakers vulnerable if health law revoked By Deena Beasley Posted 2012/05/24 at 10:12 am EDT LOS ANGELES, May 24, 2012 (Reuters) — Pharmaceutical companies, which were spared some of the moresweeping regulations in President Barack Obama's healthcareoverhaul, could come under more pressure if the U.S. Supreme Courtstrikes down part or all of the 2010 law. Drugmakers agreed to pay about $100 billion over 10 years in excisetaxes and discounts on medications under the law, but were expectedto benefit overall as more than 30 million uninsured Americans gethealth coverage. "The law was a modest positive for them in terms of growth involume and the ability to charge higher prices," said DanMendelson, chief executive officer of consulting firm AvalereHealth and a former associate director for health for the U.S.Office of Management and Budget. Other segments of the industry, from hospitals to insurers, mustmake far more substantial changes to how they operate, includingextending coverage to higher-risk patients and finding ways toreduce the cost of care. But if the court overturns the law, drugmakers could again becometargets in the debate over how to reduce a ballooning U.S. deficit,industry experts say. Economic concerns could revive ambitious proposals to cut medicalcosts by reimporting cheaper drugs from other countries, cuttingpharmaceutical prices for the government-run Medicare and Medicaidhealth plans, and even replacing private insurance withgovernment-funded plans. "It could be a lot worse for pharmaceutical companies," said LesFuntleyder, portfolio manager for Miller Tabak & Co. "Therewill be healthcare reform in America because the economic situationwill require it sometime in the next 10 years." At the same time, the pharmaceutical industry is grappling with anunprecedented wave of patent expirations on top-selling drugs likePfizer Inc's cholesterol-lowering Lipitor. More than $70 billion inrevenue from brand-name medicines will have lost patent protectionbetween the second half of 2011 and the end of 2015, according toratings agency Fitch. Republicans in the House of Representatives are already questioningwhether the industry received too sweet a deal under the healthcarelaw, and have started an investigation into negotiations betweendrugmakers and the White House. Goals of the probe include findingout whether a deal was made between pharmaceutical companies andthe Obama Administration in return for publicly supporting the law,according to officials at the House Committee on Energy andCommerce. The Pharmaceutical Research and Manufacturers of America, a tradegroup whose members include Amgen Inc, Eli Lilly & Co, Merck& Co and Pfizer, has come under scrutiny in the probe. "We are certainly hopeful for the court to provide clarity on thelaw," said Matt Bennett, a spokesman for the group. SUPREME COURT EXPECTED TO ACT IN JUNE Parts of the Affordable Care Act have been challenged by 26 states.Action by the Supreme Court, expected in June, could includestriking down one or more specific provisions within the law oroverturning it completely. Full repeal of the law could prompt a short-term rally of 3 percentto 5 percent for drugmakers' shares as investors account for theannulment of taxes and a delay in generic competition forprofitable biotechnology medicines, said Michael Meyers, chiefexecutive officer of hedge fund Arcoda Capital Management. But longer-term risks would increase. "The devil that you know inthis case is probably better than the alternative for them," Meyerssaid. For example, the government could take a new look at how the drugsit pays for can help reduce a budget deficit that stood at $1.3trillion in the fiscal year that ended in September. Healthcarespending in the United States, at 18 percent of gross domesticproduct, is the highest in the world. Since the healthcare law's passage in March 2010, the NYSE ArcaPharmaceutical index has risen 6 percent, while the Standard &Poor's 500 stock index is up 14 percent. The more volatile Biotechindex has gained 19 percent. "The presumption is that if the government negotiated as a bloc ...they would have much more bargaining power, similar to what you seein Europe," Miller Tabak's Funtleyder said. Those trends are already gaining ground. A 2011 analysis byconsulting firm Deloitte found that Kaiser Permanente, thenonprofit health plan that insures nearly 9 million Americans,placed reimbursement restrictions on more than 130 of the world's315 top-selling drugs. The German healthcare authority put limitson 36, and the British national health system, on 37. Others see elements of the law surviving, such as a measure thatcalls for more real-world evidence of a new drug's superiority overother treatments to support prescriptions and reimbursement. Thatcould chip away at the advantages of novel, higher-priced productsthat benefit from aggressive marketing. "Even if the legislation is overturned, much of the change that isin place is going to continue as a result of market forces," saidTerry Hisey, head of Deloitte's life sciences practice. "This trainhas left the station." Hospital payments by Medicare, the government health insurance planfor the elderly, have already been tied to treatment results ratherthan the number of services patients receive. There is talk of asimilar reimbursement structure for nursing homes. Even a provision to bring cheaper generic versions of complicated-- and expensive -- biotechnology drugs to the market could stillsurvive the law's invalidation. The Food and Drug Administrationwould probably urge makers of such biosimilar drugs to move aheadwith plans to file for approval through the existing regulatoryprocess. All of these practices could come to haunt the pharmaceuticalindustry, as they will put pressure on prices without broadeningthe pool of Americans with health coverage to pay for treatment. "If the law is repealed," said Avalere's Mendelson, "but Congress,for fiscal reasons, says all of the offsets are going to bereinstated, that would be the most difficult outcome for thepharmaceutical industry." (Editing by Michele Gershberg and Lisa Von Ahn). I am an expert from oem-foglights.com, while we provides the quality product, such as China Toyota DRL , Rear Trunk Spoiler Manufacturer, Honda Element Fog Light,and more.
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