Understanding Exchange Impact On Pharmaceutical Companies
By Greg Bengel, contributing writer
A recent study says that pharmaceutical companies will see modest gains offset by discounts and rebates when the health insurance exchanges kick in
A recent study from PwC’s Health Research Institute (HRI), first of a two-part series titled “Health Exchanges: Open for Business,” looks specifically at what the opening of the exchanges will mean for the pharmaceutical industry.
“The advent of health insurance exchanges this fall is unlikely to be as significant for the pharmaceutical industry as for other parts of the healthcare sector, such as insurers and hospitals,” the study says. “There will be modest financial gain for drugmakers from previously uninsured individuals receiving subsidized coverage through exchanges. Any potential gain driven by new sales will likely be offset by new rebates and discounts the industry must pay under the Affordable Care Act (ACA). However, the impact will vary by company based on its product portfolio and how each state marketplace operates. Drugmakers need a detailed state-by-state analysis to fully understand the impact of the new exchanges on their bottom line.”
In terms of how the exchanges will affect pharmaceutical companies financially, the report says that will depend on several different factors which will be ever in flux, including how many plans will be participating in the exchange, what kind of coverage is provided from each plan, the value of rebates and discounts associated with each plan, how many people are enrolled in the plan, and what kind of drugs the company offers. The best PwC can say is that pharmaceutical companies need to make sure they monitor and assess their specific situation.
There is at least one factor that the study can answer with a bit more certainty, and that is how much the newly-insured will spend on drugs. The study references the 2010 Medical Expenditure Panel survey, which shows that the uninsured spend less on drugs than the insured. While becoming newly-insured is likely to increase the amount of people who purchase drugs, it is unlikely to make up for the fee rebates companies will have to pay. “According to an analysis by HRI, branded pharmaceuticals could potentially lose about $155 billion over the next decade as a result of discounts in the Medicare Part D doughnut hole, increased Medicaid rebates, industry fees, and the establishment of a biosimilars regulatory approval pathway,” says the study. “Those losses will be partially offset by $15 billion due to a modest increase in sales from expanded insurance coverage, resulting in a net loss of $140 billion.”
Similarly, the study says, pharmaceutical companies are not likely to increase their profits from people enrolled through Medicaid, given the rebates they must pay.