In May, I wrote about Ian Morrison's predictions that some version of healthcare reform would be better for the industry than
no healthcare reform. A lot has happened since then, including two bills, the Senate Finance Committee's proposal led by Senator
Max Baucus (D-MT), and the deal that PhRMA struck with the White House in June to contribute $80 billion over 10 years toward
the cost of reform.
Even as things continue to evolve, the June deal looks pretty darn good. So good, in fact, that I have begun to think my earlier
fears that healthcare reform might hurt the drug industry were rather na´ve.
Through the arrangement, pharma companies would help pay for the cost of healthcare reform by providing a 50% discount for
brand-name prescription drugs in the Medicare coverage gap (the so-called "doughnut hole"). In exchange, there would be no
drug reimportation or price negotiations on drugs sold to people covered by Medicare. And according to various recent estimates,
the additional sales that the industry may gain through healthcare reform, primarily through expanded coverage, could be significant,
and far outweigh any sacrifices.
According to a new report in The Pink Sheet, for example, expanded coverage could bring drugmakers approximately $115 billion in additional revenue over 10 years. This
number has been extrapolated from the proposed 15–20% fees on the industry's increased business—fees that are included in
the industry's $80 billion contribution. (Senate Finance Committee staffers have estimated pharma's fees at $23 billion, which
is 20% of $115 billion). Subtract the $80 billion in costs savings that PhRMA promised the White House, and the industry nets
Of course, not everyone agrees with such estimates. But it seems clear that insuring the roughly 46 million Americans who
are now uninsured will increase drug sales.
It's also true that other plans to add new pharma industry fees are afloat, like the one proposed by Senator Bill Nelson (D-FL).
Nelson's amendment to the Senate bill would extract about $100 million more from manufacturers over 10 years, by recovering
profits the industry gained following the 2003 Medicare drug legislation. Under that legislation, older Americans who had
received prescription benefits under Medicaid were shifted into the new Medicare coverage, where the government paid higher
prices, because the Medicare plan did not include discounts that were part of the Medicaid plan. In the latest development,
the Senate Finance Committee narrowly voted against Nelson's proposal. But even if it were to pass, it is useful to remember
that such fees would basically reverse recent gains, rather than be truly new cuts into industry profits.
In a July interview on National Public Radio, PhRMA President and CEO Billy Tauzin opined that healthcare reform is not only
a moral imperative but an economic one. "The studies we have indicate that if we do nothing now, this country is going to
get sicker and poorer and less competitive in the world," he said.
I couldn't agree more. So although major elements of reform remain to be hammered out, I am no longer worried about whether
the pharma industry, or innovation, will suffer as a result. In that same NPR interview, Tauzin himself indicated his confidence.
"We'll do OK," he says.
So now I'll go back to worrying about the American people, particularly the uninsured and the underinsured, who desperately
need reform. I hope we all do OK.
Laura Bush is the editor in chief of BioPharm International , firstname.lastname@example.org