Impact of the US election result on the Affordable Care Act and Medicare

GlobalData Healthcare 19 January 2021 (Last Updated January 19th, 2021 16:03)

Impact of the US election result on the Affordable Care Act and Medicare
The contrast between President Donald Trump and President-elect Joe Biden’s stances on healthcare was quite stark. Credit: Shutterstock.

The results of the US elections are finalised and the new government will consist of President-elect Joe Biden along with a Democrat-controlled Congress, including both the House of Representatives and the Senate. This shift in power could have major implications for the pharmaceutical industry over the next four years, as, on one hand, we will see higher drug pricing pressure, but on the other, we will see the increase in the number of insured US patients.

The contrast between President Donald Trump and President-elect Joe Biden’s stances on healthcare was quite stark. During his presidency, Trump was trying to repeal and replace the Affordable Care Act (ACA), known colloquially as Obamacare, with a plan that includes weaker protections for individuals with preexisting conditions, reduced assistance with premium fares, elimination of the Medicaid expansion, and a cap on all federal funding for Medicaid. In contrast, Biden was proposing to build on the ACA by increasing premium assistance and creating a Medicare-like public option plan that would be available to anyone and would automatically cover people with low incomes in states that have not expanded Medicaid. Biden’s proposed plan has the potential to make coverage more affordable for a significant number of people, but the federal spending will be much higher, with some estimates from Biden’s campaign stating federal spending would double over 10 years.

With Biden now in power and Congress controlled by Democrats, it is very likely that the ACA will be expanded and that a new plan will serve as a transitional piece of legislation that could pave the path to a Medicare-for-All single-payer system in the future.

In terms of implications for the pharma industry, under Biden’s plan, more US patients would be visiting doctors due to having more comprehensive insurance coverage; this may drive the diagnosis rates up and increase the size of the drug-treated population, leading to increased revenues for the pharma industry. On the other hand, pricing pressure from the ACA could drive toward using generic drugs instead of newer, more expensive drugs. Additionally, Biden’s plan would give the federal government the authority to negotiate drug prices for Medicare and other public and private purchasers. A price cap could be put in place based on the drug prices in other high-income countries, consumers would be allowed to import drugs, and tax breaks could be eliminated for drug advertising expenses. Albeit benefiting patients, this could, in turn, have a negative impact on pharma industry revenues.

Due to several drivers and barriers emanating from Biden’s plan, it is not immediately clear how the US election results will impact the pharma industry growth overall. However, US patients will certainly benefit from the wider insurance coverage and lower drug prices.