U.S. Health Care Reform: Change for the Pharmaceutical Industry

Abstract

This research paper describes the proposed impacts that health care reform will have on the pharmaceutical industry. Health care reform will not only effect retail, hospital and mail order pharmacies, but also pharmaceutical manufacturers, prescription benefit managers (PBM) and pharmacists. Not only will the proposed changes be challenging for the pharmaceutical industry, Americans already covered by Medicare Part D will be required to change their current medication to a medication that may not work for them or have increased out-of-pocket expenses. This research paper is composed from peer reviewed journals and references are available on the last page of this research paper.

U.S. Health Care Reform: Changes for the Pharmaceutical Industry

One of the most heard about political issues for Americans today is the issue of health care reform. The issue of health care reform falls into the social/civic and values area. Although health care for everyone sounds like a great idea, there are always positive and negative thoughts, ideas and influences involved in such a drastic change for our nation. This research paper will focus on the impacts that the pharmaceutical industry and Americans will face with the proposed changes associated with health care reform.

An article in the American Journal of Health Systems Pharmacy from 2010 stated, total prescription drug expenditures in the United States increased from $279.6 billion in 2007 to $284.7 billion in 2008, a 1.8% change. This compares with a 4.0% increase from 2006 to 2007. This recent trend continues the decline in the growth of prescription drug expenditures, compared with the 8.9% growth rate observed in 2006. The continued decrease in the rate of growth of prescription drug expenditures was driven by a number of factors, including increased utilization of generic drugs a lower-than-expected cost of the Medicare drug benefit, and continued attenuation of the number of new and innovative drugs coming to the U.S. market. The influence of health care reform grabbed the nation's attention in 2009, the recession of 2008 and 2009 have influenced moderation of health care spending (Hoffman, 2010).

In 2006, Medicare Part D was introduced to beneficiaries already enrolled in Medicare. Medicare Part D is coverage for prescription drugs. This was the first big challenge that the pharmaceutical industry faced. Software upgrades compatible with all coordinating PBM's and the Center for Medicare Services (CMS), and the challenge with determining the required insurance information for point of sale (POS) submission to the PBM. With the trend of decreasing drug expenditures the physicians have been limited to the medication that they can prescribe for patients with Medicare Part D coverage due to risk of the patient falling into the coverage gap. Coverage gap, also referred to as the "donut hole", a term referenced in prior years when a patient on Medicare part D exceeds the maximum allowed benefit (MAB) for prescription drugs in the given calendar year. Physicians have also been forced to prescribe from the patients Medicare Part D formulary. Medicare Part D plans have a specified list of covered medications covered by the plan, if the prescriber chooses to prescribe off formulary, the patient either has to pay out-of pocket for the medication or the prescriber has to call the prescription benefit manager (PBM) for a prior authorization (PA). There are several issues that arise from prescribing off formulary, first patients covered by Medicare are of qualifying age or disabled, they typically don't have the extra money to pay out-of-pocket for their medication. Second, the patient will have to wait for the pharmacy to get in touch with the prescriber about getting the prior authorization. Medicare Part D plans have formularies to keep prescription costs down and to track that the patient has tried a medication form the formulary first. Most of the time medications on the formulary are generics with a specified indication. The pharmaceutical industry started to feel impact with a decrease in revenue and patient satisfaction. When patients have to wait longer and or the pharmacy tells them that Medicare won't pay for their medication that their physician wants them to have them become very frustrated with the pharmacy. The pharmacy is the face that patients are seeing when they go to get their medication so they tend to associate the pharmacy as being the problem with them getting their medication. According to an article in Pharmacy Education titled, The role of the pharmacist--division of labour in healthcare, Many actors in health care would like to abolish the pharmaceutical profession. Politicians in search of further cost saving alternatives have seized upon the retail margins of pharmacies (Dietrich, 2006). According to Applied Clinical Trials, the impact that health care reform and its effect on the pharmaceutical industry at large and the clinical trials process in particular will require a lot of dialogue, direction, and information in the coming months (Henderson, 2010). The Drug Information Association (DIA) also recognizes the proposed changes and is changing in response to what they see as new and necessary in the pharmaceutical industry.

In an article from Health Services Research in 2007 titled Estimating the Effects of Prescription Drug Coverage for Medicare Beneficiaries. The design of the standard Medicare benefit suggests some beliefs of policy makers about the nature of selection and drug price sensitivity among the elderly and disabled. The standard benefit effective in 2006 includes a $250 deductible with 25 percent coinsurance for spending between $250 and $2,250. Between $2,250 and $5,100 in total drug costs, coinsurance is 100 percent, creating the so-called ''doughnut hole.'' Above $5,100 in total drug costs, the beneficiary pays just 5 percent of drug costs. The Part D premiums for the standard benefit are subsidized at approximately 75 percent for all individuals. Individuals who are dual eligible for Medicare and Medicaid and those with low incomes and assets are eligible for additional subsidies that reduce the deductible and coinsurance, remove the doughnut hole, and reduce or eliminate the premium (Shea, 2007). The Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act, which were signed into law in March, offer some relief for those in the coverage gap this year and eventually eliminate the gap. In June of 2010 CMS began issuing a one- time rebate check to beneficiaries who reached the coverage gap effectively in an effort to reduce the out-of-pocket