PharmExec Blog

Health Reform Hazards: Steering Your Course Through the Rhetorical Shallows

BERLIN - OCTOBER 13:  A secretary accepts EUR ...
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Crafting consensus legislation on health reform depends heavily on all parties understanding precisely the terms of the debate. With the two House and Senate bills now topping out at more than 4,000 text pages, prospects for even a basic awareness of the implications of this reform for big pharma and society are dim. The unfortunate result is that ideology and punditry are today driving much of the discussion, orchestrated by interest groups with an eye on shaping the opinions of a restive public.

As always, money is the price of admission to the circus inner ring. The Center for Responsive Politics reports that health sector interests – ranging from the drug industry and insurers to organized labor and professional academic organizations – will spend $400 million by the end of this year to influence the reform legislation. This is a record in terms of any one piece of legislation before Congress, and for that the many who have invested resources in lobbying have scant assurance that their goals will be secured – or more important, maintained for the long-term.

The conclusion is to expect the unexpected. And to drive that point further, here are a few choice clichés about health reform and the realities likely to intervene to humble even the most confident of forecasters:

“Getting a bill passed will provide the certainty that investors need to secure their business.”  Signing a massive reform bill into law is but the first step of a mandated process likely to take years – well beyond the current business cycle.  Hence the impact of reform is virtually impossible to assess, except for the fact that more uncertainty involving one sixth of the US economy is unlikely to encourage the private risk-taking that creates jobs and tax revenues.

There is the obvious fact that for budgetary reasons much of the contents of the bill will not be implemented until 2014, midway through a President Obama second term.  What takes place first is the preparation of regulations to put flesh on obscure legislative language, and this will involve the participation of staff from at least 40 federal departments and agencies. And many changes with the largest impact on industry – including bundled payment schemes, accountable care organizations or activities to support biomedicines innovation – must be tested first as “pilot” programs. These require extensive negotiations with state and local governments as well as with industry; based on previous legislative history this can take as long as a decade.

Finally, there is a follow up legislative agenda for Congress, which according to the Democratic leadership will include hotly contested and commercially sensitive issues like coding reforms for Medicare reimbursement, due to the fact that the current system has not really been changed since the 1970s.

“Universal coverage for all Americans can be achieved without raising taxes on the middle class.” Reform will move the US closer to the ideal of the Euro/Japanese welfare state – that is clear. But the structural implication of financing this worthy goal over time is not addressed in the current legislation.  The best way to show this is to examine what the public in other OECD countries accept as the condition for maintaining social equity.  In all the major European markets plus Canada, Australia and Japan, the cost of health care is paid for through a mix of employer and employee contributions, dedicated taxes, general revenues, and, most importantly, a value added tax [VAT] on consumer purchases.  In most countries, VAT is applied to retail transactions at the staggering rate of nearly 20 per cent.  It’s a proven revenue raiser for expanded government; experience suggests that if the US wants universal subsidized coverage combined with continued quality care for aging baby boomers on Medicare, it will have to crack this nut, sometime in the next 5 years.

“More competition will be good for our industry.”  Examine carefully where such competition is applied: experience outside the US shows that competition-based reforms usually focus on the insurance sector, which is then compensated for by stronger government regulation of commoditized purchases like medicines. Countries where “market competition” has been endorsed as a broad reform objective – including the Netherlands and Switzerland – have actually tightened constraints on biopharmaceutical spending as a way to recover “savings” captured by the private sector in insurance.  Thus, for some segments of the health care supply chain, more competition leads instead to the opposite.

“We need a process where decisions on access to a new therapy is held separate from politics.”  This notion is commonly cited as justification for creating a new federal panel to evaluate the clinical effectiveness of alternative health interventions. Yet is this approach necessarily good for patients or industry?

Again, precedents outside the US show that when decisions are taken by “experts” immune to stakeholder pressure, fewer new drugs are made available to patients. In Quebec last year, the pharmaceutical industry hastily reversed its position on a new health technology assessment agency to be run exclusively by appointed bureaucrats after realizing it would lose its leverage as a key investor and job creator to shape actions taken by that body on provincial formulary listings. Politics may be as messy as making sausage but the ingredients are moldable and soft to the touch – not to mention quite tasty for those who can pay to watch.

“No enacted bill on health reform will incorporate costs into the evaluation of new medicines for public reimbursement.”  Regardless of the wording of the law, this barrier will be breached through application in practice, particularly once FDA and CMS begin cooperating in the collection and assessment of information provided by industry through the clinical trial process.

The history of the UK National Institute for Health and Clinical Excellence [NICE} bears repeating. Endorsed by the industry at its founding in 1999, on the basis of a guarantee that decisions would never incorporate pricing, NICE today is knee deep in what amounts to price negotiations through the euphemistically titled “patient access schemes” that effectively lower prices paid through the NHS to below list.

There is no contest between a piece of paper law and “mission creep:” once the bricks and mortar of a new federal Center for Comparative Effectiveness are in place, all bets are off because of the basic driving instinct of organizational self-preservation, which is to fill empty space with action.

In sum, the road to reform begins with a single step, but keeping pace will require the stamina of a marathoner – and the balance is likely to be off stride. The best advice in following the process internally is to ensure ongoing input from experts outside the US because in policy, the past is prologue.

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