Medicare reform will expand US market
pharmafile | November 27, 2003 | News story | | Medicare, US, healthcare reform
America’s long-awaited reform of the Medicare health insurance system has received the backing of both Houses of government, giving over 40 million ‘seniors’ help with prescription drug costs for the first time.
The momentus expansion of Medicare has been hailed as a breakthrough by many, not least the industry which looks likely to enjoy a boost to prescription drug sales.
Analysts Deutsche Bank said: “We believe passage of the Medicare bill is a decided positive for the drug industry as it is expected to drive a significant increase in volume, offset only partially by increased discounting.
“In addition, the legislation should help to remove a long-standing political thorn in the industry’s side.Analysts say the reforms also have the potential to increase the size of the US’ prescription drug market, already the biggest in the world, with a potential $7 to 10 billion increase in revenue despite the expected impact that price discounting will probably have.
The European pharma companies that will benefit most from the reforms are Novartis, AstraZeneca and Sanofi-Synthelabo, as they derive the highest proportion of revenue from US sales of products for diseases that are more prevalent amongst the elderly.
The changes are the biggest reforms to the system since it was first set up in 1965 and it took nearly a year to finalise the details.
The $400 billion reform of the country’s federal health plan for the elderly will see prescription drug benefits included in cover for the first time as part of the 10-year bill.
Although the legislation won’t come into effect until 2006, within six months of it being signed seniors will be eligible for a drug discount card that offers 10-25% savings from their regular drug costs and those on low incomes will also get up to $600 a year towards drug costs.
From 2006 all seniors will be eligible for prescription drug coverage for about $35 a month that should halve the average senior bill for medicines.
President Bush hailed the bill as a major victory to improve America’s healthcare system. It will enable him to bring in the legislation ahead of 2004 election year.
The President told a group of seniors at Spring Valley Hospital in Las Vegas: “Medicare should cover medications to keep our seniors out of hospitals. The new bill does this.
“The important part of the reform is to recognise that medicine has changed. It will save our government and the taxpayers money by providing prescription drugs early so we don’t have to pay for it in long hospital stays and invasive surgeries.”
Under the reforms there will be universal access to a health savings account that will allow people to make tax-free savings in anticipation of future medical expenses. Medical savings accounts provide incentives for people to make wise choices and help to maintain doctor-patient relationships, President Bush said.
But critics of the legislation said it was too favourable to health maintenance organisations and the pharma industry.
Democratic Senator for Massachusetts Edward Kennedy said the bill represented the unravelling” of the Medicare system, and a victory for private healthcare insurers Health Management Organisations, whose role will be extended by the reforms.
Thomas Mann, a congressional scholar at the Brookings Institution said the bill would not be the last word on Medicare reform.
“When this passes, it will be the beginning of a massive political struggle to define the meaning of the bill. Rather than resolving something, it will keep it very much in play. The outcome of subsequent elections will have a tremendous impact.The bill also attempts to stem the flow of cheap imports into the country from Canada, where drugs can cost half as much as in the US, and are a major political issue and of great concern for the industry.
Under the terms of the newly agreed Medicare Prescription Drug, Improvement and Modernisation Act of 2003, medicines can be re-imported from Canada, but only if the Health and Human Services department certifies their safety and there are cost-savings.
Drug companies have this year faced further wrath from US seniors who have increasingly protested against the prescription drug costs they have had to pay themselves.
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