Friday, October 24, 2014
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Supreme Court reaction varies by profit and benefit potential

The Supreme Court decision upholding most of the health care law was diplomatically applauded by Big Pharma, but hated by medical device makers.

Supreme Court reaction varies by profit and benefit potential

The Supreme Court's decision Thursday to uphold most of the Patient Protection and Affordable Care Act means different things to different people at different moments, sometimes depending on which hat they are wearing.

The pharmaceutical industry was sort of, somewhat, temporarily happy, but wants more from the deal.

Medical device companies are, generally, not happy at all.

President Obama's signature legislation was designed to broaden health insurance coverage for about 30 to 50 million uninsured Americans, with the underlying philosophy being that basic health care is a right and not a privilege. It was also meant to start to improve care and bend the cost curve.

Some critics wanted the whole thing scrapped. Some critics said the law didn't go far enough.

The challenge has several parts. Too many Americans still don't realize the government has been the biggest payer of health-care bills for decades, like it or not. Examples of that ignorance were the signs at Republican rallies in 2009 saying, "Keep the government's hands off my Medicare."

Established in 1965, Medicare is the government insurance program that pays much of health-care bill for people 65 and older. It is paid for by premiums and taxes, but the inflow of money is not matching the outflow and projections for future years are worrisome.

Still, many Americans - individuals and business - want more or better care than whatever they have now and want to pay less for it as a consumer or profit more from the system as a business. That equation doesn't compute. "Compromise" and "Collective Sacrifice" are slogans that fit on bumper stickers but they are absent from placards at most political rallies.

And while politics seems to dominate the discussion, potential profit sometimes trumps political positioning, if only for the short term.

A great example of that came Thursday via Alan B. Miller, chairman and chief executive of King of Prussia hospital operator Universal Health Services Inc. Miller's for-profit hospital gets about 50 percent of its revenue from government insurance plans, but he complained to me last year that it wasn't getting enough government money to pay for patients without insurance.

But Miller also put conservative Republican and former Pennsylvania senator Rick Santorum on his company's board, so some of that government cash went toward Santorum's six-figure director fees. Santorum, of course, hoped to unseat Obama and overturn the health-care law.

On Thursday, however, Miller told Inquirer colleague Harold Brubaker that he was happy with the Supreme Court decision.

"This is good for hospitals because 32 million people will now have some kind of coverage, which they didn't have previously," Miller said in Thursday's Inquirer story, a link to which is here. "We had bad debts from this group because they didn't have funds to pay."

Pharmaceutical companies, groups and individuals have varying views of the law, whatever their carefully worded public statements might say.

They like having more people insured, by private insurers or governments, because insurers want people to take prescription drugs to avoid catastrophic events like heart attacks and strokes, which translate into higher costs for trips to hospitals.

“Johnson & Johnson supported enactment of coverage under the Patient Protection and Affordable Care Act, and we believe this law has the potential to help more patients gain access to high-quality, affordable care and innovative treatments," J&J said in a statement.”

More people taking more pills is good for Big and Small Pharma, and their wholesalers like Valley Forge-based AmerisourceBergen.

“For AmerisourceBergen and the pharmaceutical industry, we believe manufacturers will benefit from the increased number of patients that will have more access to prescription medicine,” Peyton Howell, president of AmerisourceBergen’s consulting division, said in an interview. “The pharma sector tends to be the most cost effective. By having more preventative care, patients can avoid the more costly hospital care.”

However, the pharmaceutical industry does not like the idea that the government has been and must continue to reduce what it pays for drugs and other medical care. Remember that budget deficit that Republicans harp on? Eventually, all of that money comes out of the same piggy bank.

The ACA has a formula for closing the Medicare drug doughnut hole, a problem that can mean huge costs for seniors trying to pay for medicine. That part of the plan has already started. But some of the money to close the hole comes from pharmaceutical companies, either through lesser reimbursements or other pay mechanisms.

Pharmaceutical companies are very much against any efforts - within ACA or not - to further restrict government payments for drugs. Part of the ACA includes the Independent Payment Advisory Board.

"IPAB would recommend policies to Congress to help Medicare provide better care at lower costs," the White House said on its health care blog. "This could include ideas on coordinating care, getting rid of waste in the system, incentivizing best practices, and prioritizing primary care."

The White House notes that "IPAB is specifically prohibited by law from recommending any policies that ration care, raise taxes, increase premiums or cost-sharing, restrict benefits or modify who is eligible for Medicare."

But this is what critics have called "death panels."

Pharmaceutical companies view it as a death-to-big-profit panel.

Some in Big Pharma suspect that the cost-savings to the system of having people take more drugs will survive whether Republicans or Democrats control the government after the November elections. But if Republicans gain control, Big Pharma will argue that it loves free enterprise, especially the part where the government pays whatever prices are set by for-profit drug companies.

In his carefully word statement, Pharmaceutical Research and Manufacturers of America (PhRMA) President and CEO John J. Castellani recognized the political debate will continue and the lineup might change. PhRMA is the lobbying arm of the branded pharmaceutical industry.

“We respect the Court’s decision and recognize that there will be ongoing policy discussions about the future of health care in America, and about the impact of today’s decision on the health care law," Castellani said. "We will work with Congress and the Administration on a bipartisan basis to address these important issues and will continue to advocate for an environment that fosters medical innovation and access to new medicines. We will also continue to work for necessary changes to the Affordable Care Act, such as the repeal of the Independent Payment Advisory Board (IPAB).”

If any industry group's position is relatively simple and unambiguous, it would be the folks in medical devices.

That group also wants the government to pay full price for every stent or replacement knee ordered by a doctor for a Medicare patient. But the device group has always disliked the ACA because there is a 2.3 percent tax on the sale of each device.

“Today’s decision adds new urgency to repealing the medical device tax so that patients and providers can continue to expect innovative devices and technologies," Mark Leahey, president and CEO of the Medical Device Manufacturers Association (MDMA) said in a statement. "While MDMA and our members still have seen no evidence or reports showing any ‘windfall’ for medical device companies as a result of the ACA, it is clear that this misguided policy has already led to job losses and cuts to research and development.

“If the true goal of health care reform is to reduce costs and to improve patient care, then Congress and the President need to repeal the device tax so America’s medical technology innovators can continue to develop cutting edge products. Doing so will be a win-win for patients and jobs."

J&J is one company that has both pharmaceutical and medical device businesses.

J&J surely does not like the tax. But despite Leahey's worries, J&J has said it sees a great and profitable future in the medical device business. Words aside, that's why it bought medical device maker Synthes, Inc., of Chester County, for $19.7 billion.

David Sell
About this blog
David Sell blogs about the region's pharmaceutical industry. Follow him on Facebook.

For Inquirer.com. Portions of this blog may also be found in the Inquirer's Sunday Health Section.

Reach David at dsell@phillynews.com.

David Sell
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