Pharma Industry Lifted on the Back of US Healthcare Reform

22 March 2010 (Last Updated March 22nd, 2010 18:30)

The passing of landmark healthcare reform in US House of Representatives will extend health insurance to an estimated 36 million Americans, providing a welcome lift to the pharmaceutical and drug development industry. Although the drugs industry will be hit with a number of significant

The passing of landmark healthcare reform in US House of Representatives will extend health insurance to an estimated 36 million Americans, providing a welcome lift to the pharmaceutical and drug development industry.

Although the drugs industry will be hit with a number of significant new costs, which could total $80bn over the next decade, the industry is still expected to receive a major boost from the 32 million new insured patients who previously had been unable to afford medicine or treatment.

Many major drug companies had been critical of the proposed reforms, claiming the extra taxes involved would limit innovation and investment.

Merril Lynch healthcare analyst Eric Lo said that the bill was a best-case scenario for the drug companies.

"Having a plan in place removes an overhang on the industry by providing clarity on when and where the cuts will come," Lo said.

"It could potentially add an additional 32 million lives with prescription drug coverage, although some of this benefit will likely be offset by lower pricing."

The main provision of the bill is to reduce the spiralling cost of heath insurance by providing a middle class healthcare tax cut for families and small business owners and insuring 32 million currently uninsured Americans.

Anti-competitive behaviour by drug companies is also a major target of the reform, which aims to stop pharmaceutical companies keeping effective and affordable drugs off the market.

The prescription drug 'donut hole' in Medicare, which makes patients fully responsible for the cost of their medication until their drug costs reach a certain point, will be closed while waste, fraud and abuse will be targeted in the government-run system.

The bill also includes sweeping insurance reforms, which will prevent insurers from denying coverage to patients with existing conditions and will also allow low-income individuals and families to purchase their own health insurance.

Drug discounts will now be extended to hospitals and communities serving low-income patients.

The bill was passed by 219 votes to 212, with no Republican backing.

President Obama is expected to sign the bill on 23 March, after which it will have to be voted on by the Senate.

Obama said that the vote answers the prayers of every American who has hoped deeply for something to be done about a healthcare system that works for insurance companies, but not for ordinary people.

"If you have health insurance, this reform gives more control by reining in the worst excesses and abuses of the insurance industry. If you don't have insurance, this reform gives you a chance to be a part of a big purchasing pool that will give you choice and competition and cheaper prices for insurance," Obama said.