US healthcare reform has arrived. Now what?

Andrew Tolve reports on the likely impact of US healthcare reforms on the pharma industry



Andrew Tolve reports on the likely impact of US healthcare reforms on the pharma industry

After a yearlong battle over the merits, morals, obligations, and technicalities of major healthcare reform in the United States, the US House of Representatives voted to approve a sweeping overhaul of the nation's health system.

Republicans voted unanimously against the measure but couldn't rally enough Democratic defectors to stop the landmark bill, which some Democrats hail as the Civil Rights Act of the 21st century.

The overhaul will deliver insurance to some 32 million previously uninsured Americans, will add a further 16 million people to the Medicaid rolls, and will subsidize coverage for low- and middle-income citizens.

Patients benefit. Will pharma benefit, too?

The reform will be a game changer for the pharmaceutical industry as well. Pharmaceutical Research and Manufacturers of America (PhRMA), the biggest trade association for prescription drug companies, voiced its approval for the measure.

We continue to believe that comprehensive healthcare reform will benefit patients and the future of America, the association said in a statement. Thats why we have been involved in this important public policy debate for more than a year ... The existing barriers to quality healthcare simply are not acceptable. Todays important and historic vote in the House will help to expand healthcare coverage and services to tens of millions of Americans who are uninsured and often forced to forego needed medical treatments.

PhRMA's statement, and the implicit industry approval that comes with it, marks the end of a tumultuous debate within the pharma industry that mirrored all the twists and turns of the political debate in Washington.

For and against reform

While PhRMA and US drug makers initially endorsed the overhaulback in June, they pledged $80 billion in the coming decade to help cover the cost of reform and spent $100 million on television advertising to promote the plandiscord arose when the legislation stalled in January.

Many in the industry were worried that brand-name biotech drugs would not be protected from low-cost generic competitors for long enough.

Additionally, AstraZeneca CEO David Brennan voiced his concern that the government would use its purchasing power to negotiate cheaper prescription drug prices.

And in February, Billy Tauzin, one of the biggest lobbyists in Washington, resigned his position as president of PhRMA over criticism that he had conceded too much to policy makers and as a result had left the pharma industry exposed.

Pharmas response

Nonetheless, the bill passed, and once President Obama signs it into law, the pharmaceutical industry will be left to plan a response. From one perspective, the new legislation bodes well for big pharma.

Thirty-two million newly insured citizens means a much larger patient pool, which in turn means more people filling prescriptions. Not surprisingly, when the bill passed the Senate in December, the stocks of most big pharmas surged.

On the flip side, the reform promises to shake-up an already volatile payer landscape in the US market, which will force pharma companies to alter their sales models and likely reduce total numbers of sales reps.

Though US healthcare has plenty of problems of its own, the lack of central decision-makers allows the traditional practice of pharmaceutical representatives calling on physicians to remain effective and largely intactfor now, said Chris Wright, principal and leader of the pharmaceutical practice at ZS Associates and co-author of the Drivers of Change to Pharmaceutical Commercial Models report, in an interview with Drugs.com.

New sales models needed

Over the next several years, Wright continued, US pharmaceutical companies should trim another 15 to 20 percent of their sales forces and prepare to do what many in Europe are doing today. They must modify their direct-selling strategies and prepare to sell to an increasingly diverse group of health insurance companies, government payers like Medicare and Medicaid, and other opinion leaders who will increasingly influence prescription decisions.

AstraZeneca and GlaxoSmithKline have already trimmed their sales forces this year, a trend that Pfizer and Merck are expected to follow. Healthcare reform likely harbingers further downsizing and restructuring.

Our commitment to help pay for healthcare reform will require all of our companies to make some difficult choices moving forward on top of already losing more than 150,000 jobs since 2007 because of the recession and other economic factors, PhRMA said in its statement.

But throughout this long process, we have been guided by a belief that all Americans should have access to high-quality, affordable healthcare coverage and services. This legislation, while not perfect, is a step in that direction.