Health Policy Challenges for Obama Administration

White House and Congress likely to struggle over funding for bio/pharmaceutical regulation.
Dec 02, 2012
Volume 36, Issue 12

Jill Wechsler
The calm after the heated election battle this year has been brief due to pressure on policymakers to tackle overwhelming budget issues. With Republicans maintaining tight control over the House of Representatives but losing ground in the Senate, much depends on the ability of President Obama to engineer some kind of "fix" to the mounting deficit during the year-end "lame duck" Congressional session. Healthcare policy was a key point of dispute during the election campaign, marked by promises of better coverage and predictions of soaring costs by both candidates. Now, scheduled funding cuts and significant tax increases are expected to play a large role in shaping the reform program.

The Obama victory ended prospects of wholesale repeal of the Affordable Care Act (ACA). House Republicans will continue to challenge various requirements of the healthcare legislation, but key provisions for pharmaceutical companies, such as rebates on drugs for seniors in the Part D coverage gap and authorization for biosimilars, are unlikely to change.

More broadly, the promised expansion of coverage to some 30 million previously uninsured Americans will move forward, although with consumers paying higher premiums and cost-sharing to cover ever-rising healthcare costs. That sets the stage for significant growth in the market for brand-name drugs. The Department of Health and Human Services (HHS) is working hard to meet a host of deadlines and timeframes for establishing exchanges, defining benefits, and expanding Medicaid, much of that involving states that have been reluctant to commit to these new programs in a period of political uncertainty.

Spending cuts ahead

The dark cloud looming over all these programs is the year-end "fiscal cliff," with nearly $500 billion in tax increases and spending cuts scheduled to begin Jan. 1, 2013 unless Congress acts. Executives at biopharmaceutical companies are watching closely at how tax and budget proposals will affect corporate tax rates and investment, as well as the specific funding for FDA, the National Institutes of Health (NIH), and other activities important to biomedical innovation and healthcare coverage.

All sides acknowledge the crucial need to reduce both public and private outlays for US healthcare, and drug prices and reimbursement are a prime target, particularly related to outlays for federal government health programs and Medicare Part D. House Democrats have pressed for added rebates on drugs purchased by Medicare drug plans for low-income "dual eligible" seniors, which could total more than $100 million over 10 years. There also are budget proposals on the table to reduce federal spending on drugs for federal government employees, as well as other government health programs.

The Obama victory offers some stability for FDA, as the agency continues to implement the FDA Safety & Innovation Act and struggles to find a middle ground between speeding untried new medicines to patients and protecting the public from undue risk and harm. Although there won't be a wholesale change in executive branch leadership, many top administration officials are likely to move on to other roles, and extensive cuts in the 2013 budget could undermine many FDA projects. An 8.2% cut in the FDA budget, as proposed under the sequester process, would reduce FDA's 2013 budget by $320 million and prompt the agency to lay off approximately 1000 employees, according to consultant Steven Grossman, publisher of FDA Matters. Even without such a severe, across-the-board cut, which could jeopardize FDA's ability to collect user fees from pharmaceutical and medical device makers, the FDA budget will remain vulnerable to pressures to reduce federal spending for some years to come.

Severe reductions in NIH funding, moreover, would jeopardize the pace of new drug and biotech discovery and support for clinical research that is key to spurring innovation needed to fill the depleted new drug pipeline. The biomedical research community is highlighting the importance of both FDA and NIH in protecting public health for patients at home and around the world.

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