Healthcare Reform Proposals Challenge Manufacturers

Comparative-effectiveness analysis aims to promote appropriate pharmaceutical spending.
Jun 02, 2008
Volume 32, Issue 6

Jill Wechsler
As the presidential election campaign moves toward its final stage, healthcare reform remains a high-profile issue. Efforts to expand coverage for the uninsured include proposals to curb outlays for prescription drugs by expanding access to generic products and to low-cost medicines from abroad. The reformers also support comparative-effectiveness analysis to identify therapies and treatments that have sufficiently great value to warrant high price tags. Drug manufacturers, however, worry that this development will foster inappropriate controls on drug coverage and demands for costly additional research.

These issues are playing a leading role in the national health-reform debate as polls continue to rank access to care a prime domestic policy issue for Americans. The worsening economy has underscored the link between rising healthcare costs and the erosion of US jobs, as corporate leaders point to costly health benefits as a factor undermining their global competitiveness. Concern about access to care is no longer limited to the poor; middle-class consumers fear losing their jobs and insurance.

Democratic and Republican candidates have rolled out health-reform plans that promise to cover the uninsured and retain choice in coverage and benefits. The main Democratic strategy is to expand Medicaid and the State Children's Health Insurance Program (SCHIP) to cover more kids and low-income adults. Senators Hillary Clinton (D-NY) and Barack Obama (D-IL) also propose tax breaks and other incentives to help individuals obtain health insurance; the goal is universal coverage, whether mandated or phased-in.

Jason Reed/Getty Images
Interestingly enough, Sen. John McCain (R-AZ), the presumptive Republican candidate, backs radical change that would shift from an employer-based health-coverage system to one that relies on individuals to obtain insurance through the market. McCain proposes to end tax advantages for employer health benefits. The resulting savings would support tax credits and subsidies (for the low-income and disabled) to expand access to affordable insurance, including high-deductible plans. The GOP leader also backs "means-testing" for Medicare and wants to scale back the Medicare drug benefit to reduce government subsidies for "the Warren Buffets of the world."

Elusive savings

Reform will be costly whether it involves expanded government programs or larger tax breaks. Broader Medicaid and SCHIP programs plus large tax credits or deductions will cost US taxpayers some $150–200 billion per year, according to a PricewaterhouseCoopers report on the candidates' health-reform proposals.

To obtain needed funds, the contenders seek large savings by adopting electronic medical records, encouraging prevention, and better coordinating care for high-cost patients with chronic conditions. White House hopefuls also talk of improving the healthcare system by boosting government support for biomedical research, curbing obesity and smoking, and reducing healthcare disparities.

Unfortunately, most of their proposals are unlikely to support even modest health reform. Electronic medical records can eliminate errors and increase efficiency, but will be costly to establish in the short run. Chronic care coordination and disease management may improve the quality of treatment, but will generate costs as well as savings. Consumer-directed health plans may be a useful coverage option but will not likely reduce the cost of individual coverage.

Consequently, political leaders are highlighting strategies that reduce outlays for prescription drugs. Obama promises to provide Americans with access to the "exact same drugs in Europe and Canada," where pharmaceutical companies sell them at half the US price. He plans to save as much as $30 billion by repealing the ban on government price negotiations for drugs purchased by Medicare, a policy he described in ads during the heated Pennsylvania primary campaign as a Congressional payoff to Big Pharma. Obama also wants to increase the use of generic drugs by government health programs and "prohibit big-name drug companies from keeping generics out of the market."

Similarly, Clinton promises to hold down fast-rising drug prices by removing barriers to generic competition, allowing Medicare to negotiate lower drug prices, and boosting oversight of drug advertising, "marketing excesses," and inappropriate financial relationships with providers. She wants to increase funding for the US Food and Drug Administration's Office of Generic Drugs to speed new generics to market and to create a pathway for biogeneric competition. This pathway would end "the monopoly currently enjoyed by large biopharmaceutical companies" and save $5–7 billion each year, according to Clinton.

Though Democrats have long touted such tactics to curb drug prices, it's surprising to hear similar antipharma rhetoric from McCain. He regards efforts to promote generic competition and to permit drug reimporting as compatible with his free-market approach to healthcare reform. McCain wants to develop "routes for safe, cheaper generic versions of drugs and biologic pharmaceuticals" and "safety protocols that permit reimportation to keep competition vigorous."

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