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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