Obama Health Plan: Impact On Drugmakers
11 CommentsBy Ed Silverman // February 22nd, 2010 // 10:10 am
The White House proposal forces both brand name and generic drugmakers to give something up. The brand-name industry will have to cough up another $10 billion - for a total of $90 billion - over 10 years to help close the Medicare donut hole. On the plus side, pharma is expected to gain revenue, and the fees won’t kick in until 2011, instead of this year.
Meanwhile, just one month after the Federal Trade Commission made a very public push to end pay-to-delay deals, the White House wants to give the FTC enforcement power. The White House proposal would make any such deal “unlawful and anticompetitive” in which a generic drugmaker gets anything of value from a brand-name drug maker, and a generic drugmaker must “limit or forego” R&D, marketing, manufacturing or sales of a generic. To get around this, both sides would have to verify “pro-competitive benefits,” and the ceo of the brand-name drugmaker would have to sign off (see here).
The Obama proposal also requires all drugmakers to fully disclose and report any gifts they make or financial arrangements they have with doctors, a physician practice or group. The provision is reminiscent of the Physicians Payments Sunshine Act, which has been kicking around Congress a couple of years (background).
In addition, all pharmacy benefit managers that manage the prescription drug portion of health plans under Medicare or the insurance exchange must report info regarding any rebates, discounts, or price concessions they negotiate for prescription drugs. They’ll also have to report how often they use generic drugs rather than more expensive brand name meds, to ensure more accurate payments for their services and keep health care costs down, according to the proposal.
Condor
Actually, Ed — a polite disagreement, here:
I know Reuters and the NYT, like you, are reporting that the end-to-”pay-for-delay” deals provision is a net negative for generic drug companies.
I disagree — only a few generic companies will be hurt — only those that can’t actually produce a generic version of the branded drug in question (those that make a living executing largely-collusive settlement agreements — you know who you are!).
All the rest of the generic makers will benefit (and handsomely so) from earlier, and larger revenue streams.
So this is actually a “double-whammy” [but an entirely-appropriate one] against branded pharmaceutical companies (like Merck, Pfizer and GSK) — the excise taxes are increasing, and the delays on generic versions of Temodar, Nexium, Singular, Zetia and Clarinex (to name just a few examples) are coming to an end. Wow!
Namaste
Ed Silverman
Hi Condor,
Thanks for the note. For what it’s worth the Generic Pharmaceutical Association issued a statement saying it is “deeply disappointed” by the proposal.
Gotta run,
Ed
Condor
Thanks Ed!
Yeh — I’d guess I’d say so too, if some (even a small number) of my members more than occasionally entered into patent infringement settlement/consent agreements with branded pharmas, without ever having much actual intent to manufacture a generic — but rather to extract a tribute/bridge toll payment.
That particular game is drwing to a close.
To be fair, that “gaming” involves only a very few of all the generic manufacturers, though — most make far more selling generic drugs than they book on patent settlement receipts.
On the other hand, it involves practically every major branded pharma player, on the other side of the table, MAKING these payments.
As ever, great stuff — and enjoy your evening!
Namaste
Condor
As some capital-markets-based proof of my thesis, here — Teva, probably the largest of the ACTUAL generic manufacturers (by absolute generic pill volume pushed out), rose $1.13 today, to 59.87, on the NYSE — as all the rest of Big Pharma (and health insurers) fell about 2 to 4 percent; and the overall market, as measured by the DJIA was down as well.
Namaste
Doc
Not sure this is a good plan, but anything that requires a big pharma CEO to be accountable in my mind is good. For what they are paid, they really have no risk, except being replaced. But they usually leave with a golden parachute, even in that setting.
Paul
Condor,
In one of your comments above you use the expression “my members”.
Are you representing someone or a specific sector? From your comments it seems that you are representing a subset of the generic industry.
Condor
So sorry, Paul –
I was typing imprecisely — and in a hurried fashion — had to catch a train.
No, I was referring to Ed’s quote, from the Generic association spokesperson:
. . . .Generic Pharmaceutical Association issued a statement saying it is “deeply disappointed” by the proposal. . . .
And I was suggesting that the spokesperson might be saying something to deflect attention.
The NYSE trading, on the other hand, was telling an entirely different story today.
That’s all. I do not represent any sector or subsector. I do trade various stocks for my own account, however — and do short some of those stocks, too — from time to time. I trust this has cleared up any lingering confusion.
Namaste
pharmavet
The impact can be stated in two words: more layoffs.
Vitamins Health Expert
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Thank you for posting a very informative article.
I personally appreciate mr Obama, of his work for health department. But obama needs to change his health plan to solve the problems of USA.