US Pharm.
2008:33(6)(Generic Drug Review suppl):6-8.
While the November
presidential and congressional elections are still many months away, it is
widely expected that health care reform will be at the top of the domestic
policy agenda in the upcoming fall campaign. Exploding health care costs and
lack of affordable health care coverage continue to be prominently mentioned
by many Americans as issues that they want to hear more about in the campaign
and want the next President and Congress to address. In this article, we will
look at how the approaching elections and possible health care reform
proposals might affect the generic drug industry over the next few years.
Based on the current political
environment, it is widely expected that the Democrats will retain their
majorities in both the House and the Senate, likely picking up three to five
seats in the Senate (where they currently have a 51-49 majority) and 10 to
possibly 15 seats in the House (where they currently have a 236 to 199
majority). This increase in Democratic congressional control has implications
for the generic drug industry, as Democrats in general have tended to be more
favorable in their policies toward generic drug issues than Republicans.
That's not to say that generic companies don't have many Republican friends on
Capitol Hill, though.
With respect to the
presidential election, it's too early to tell who has the inside track--the
Republican nominee or the Democratic nominee. One thing is for sure, however:
Whether John McCain, Hillary Clinton, or Barack Obama wins the Presidency, the
generic drug industry will find a friendly ally in the White House if the past
positions of these candidates are any predictor of the future. All three
presidential candidates have embraced policy positions that are favorable to
the generic drug industry during their tenure in the Senate.
Health care reform proposals
that will likely be addressed by the 110th Congress in January 2009 will
include macro reform proposals--such as trying to expand coverage to the
approximately 44 million Americans without health insurance coverage as well
as trying to find new and innovative ways to control health care costs.
Certain pharmaceutical issues
will also likely be addressed by the next Congress, such as whether to
formalize a program of pharmaceutical re-importation, allow the Secretary of
Health and Human Services the ability to negotiate prescription drug prices
with pharmaceutical companies, or authorize a regulatory pathway that will
lead to FDA approval of generic biologicals.
Those who have watched the
health care reform debate before know that policy makers have tried many
times--unsuccessfully--to expand insurance coverage to uninsured Americans
while trying to manage costs. The most recent attempt was in 1993ñ1994, during
the first Clinton term, but it ended in failure. Some see success as more
likely this time, however. Many facets of the health care industry--health
care plans, employers, and consumers--are calling for reforms because the
escalating costs of health care are forcing many employers to reduce or
eliminate their health care coverage. Escalating health care costs are
inhibiting the ability of employers (who provide this coverage to their
employees) to compete in global markets.
Comparing Democratic and
Republican Plans
Many of the
Democratic proposals use a mix of ways to cover the uninsured. The plans would
require that individuals buy their own health insurance coverage if they are
unemployed or self-employed (if they don't get it already from an employer),
require employers to provide coverage to employees or pay into a fund if they
don't, or make available one of the government-funded health care programs
available to uninsured individuals, such as the Medicaid program or the
Federal Employees Health Benefits Program (FEHBP). Medicaid programs tend to
already have high generic drugñdispensing rates, so attempts to enroll more
people in Medicaid could increase generic drug use. The FEHBP program is
generally administered by pharmacy benefit managers (PBMs), who also tend to
push generic drugs as a way of controlling costs.
Instead of expanding government health care
programs, Republicans tend to call for greater incentives for consumers to
purchase their own health care coverage in the marketplace. They would prefer
to provide refundable tax credits for consumers to purchase their own health
insurance policies. Republicans have generally been champions of health
savings accountñtype programs, which allow consumers to put away pretax money
into an account to pay for routine, general medical expenses, such as
prescription drugs and physician office copays.
This account is often combined with a
high-deductible health plan, which covers more extensive health care expenses.
These types of approaches make consumers more sensitive to the cost of care
because they generally pay out of pocket for health care until they reach
their deductible. These approaches could also encourage generic drug use.
Under these plans, a consumer whose medical condition might be equally treated
by a $120 brand name drug or a $20 generic is likely to take the generic if
they had to pay for this out of pocket.
Health care reform proposals on both sides
of the aisle call for increased use of health information technology and
e-prescribing to reduce costs, increase efficiency, and improve quality. Use
of these technologies could have a significant impact on generic drug use, as
e-prescribing can provide physicians with more cost-effective medication
choices at the point of prescribing. If the physician wants to prescribe a
brand name drug for a patient, a message may come back through the
e-prescribing system that a generic drug is available in a drug class. The
system may even provide the physician with the patient's copay information for
brand drugs versus generic drugs, so that the physician can make the best
medication choice that is within the patient's economic means. An increasing
emphasis on promoting cost-effectiveness studies as a way of making better
health care decisions could also have an impact on generic drug use.
What Medicare Part D Means
for Generics
Some policy makers
point to the new Medicare prescription drug benefit as an example of
market-based reforms that could be applied to the broader health care market,
which could encourage the use of generic drugs. The Medicare drug benefit is
perceived to be a success to date, in part because the costs of the benefit
have been less than anticipated. The significant use of generic drugs in the
program is mentioned as a key contributing factor. The Medicare Part D drug
program accounted for 19% of all retail pharmacy prescriptions at the end of
last year, and generics increased their share of total prescriptions dispensed
to 67%.1 Approximately three-fourths of FDA-approved drugs have
generic counterparts, increasing the chance that a generic would be used if
appropriate incentives existed.
The increased use of generics
in Medicare Part D is no doubt due in part to the use of tiered cost-sharing
to encourage the use of generics, as well as to step therapy and utilization
management programs used by Part D plans.2 Medicare beneficiaries
are also encouraged to use generics in the now infamous "donut hole," where
they do not have any Medicare drug coverage until they reach catastrophic drug
spending. Finally, because Part D plans also go "at risk" for some of their
spending, they have an economic incentive to use as many generics as possible.
All of the presidential
candidates support a pathway for the approval of generic biologicals. However,
they have not released all the details of their specific proposals, which are
important to know with regard to the speed with which the FDA could approve
these drugs and whether pharmacists could interchange them for branded
biological products as they currently do for traditional generic drugs. Given
the high cost of these drugs, consumers as well as plans, payers, PBMs, and
employers are all calling for a regulatory pathway for generic biologicals.
Whatever happens in the fall,
the increasing emphasis on cost of care will likely mean that generic drugs
and generic biologicals will play an important part in helping reduce the cost
of health care reform.
REFERENCES
1. Associated
Press. U.S. prescription drug sales growth slows. March 12, 2008.
2. Kaiser Family
Foundation. Medicare prescription drug plans 2008 and key changes since 2006:
a summary of findings. www.kff.org. Accessed April 2008.
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