The drug industry will shoulder more than $80 billion of the cost of healthcare reform--more even than the $90 billion bandied about as a compromise just before the bill finally hit the U.S. House floor. According to a new analysis by Leerink Swann, the government's overhaul of healthcare will hit pharma to the tune of $105 billion.
Big Pharma has been taking charges against earnings--and downgrading their forecasts for this year and next--as they come to grips with the reform law's various provisions. Some companies (Eli Lilly (NYSE:LLY), for example) see Medicaid rebates and other healthcare reform changes costing them much more than others--think Merck (NYSE: MRK). However, until now we haven't had a good number for reform's impact not just over the next couple of years, but through the full 10 years.
As the law phases in, the costs add up: Medicaid rebates come first, then Medicare Part D discounts, then fee increases. And when you add it all up, Leerink Swann says, it comes to $25 billion more than the $80 billion cost-cutting deal PhRMA made with the Senate Finance Committee and the White House, way back when the reform debate was just heating up.
That's about 3 percent of the industry's revenue over 10 years, says Miller Tabak analyst Les Funtleyder. But the pain won't be evenly spread around, given that some drugmakers do more business with Medicaid than others do. As Funtleyder tells Bloomberg, it could have been worse. Just think about Medicare price negotiation and drug reimportation, for instance.
- read the Bloomberg story