Navigating manufacturers through the political sea of healthcare

Guiding drug manufacturers through the tumultuous waters of healthcare policy has never been more important. Those harbor pilots of policy and the potential financial ramifications come in the form of economists and legislative experts.

Despite  initial Republican interest in repealing and replacing the Affordable Care Act (ACA), Congress ultimately decided to modify the Act, eliminating certain benefits such as cost-sharing subsidies that payers depend on and that helped subsidize out-of-pocket expenses for low-income patients. Additionally, legislators relaxed standards covering short-term insurance plans, resulting in the denial of coverage to patients with pre-existing conditions. That triggered a move by health plan participants to exit the exchange market, setting up a scenario of a larger risk pool of sicker patients within the market.

However, the most significant move by Congress came in 2017 with the repeal of the individual mandate that required Americans to have a basic level of healthcare coverage or face a financial penalty. Earlier this year the Congressional Budget Office estimated the number of non-elderly uninsured people across the U.S. will increase by 5 million over the next 10 years, from 30 million in 2019 to 35 million by 2029 as a result of the repeal of the mandate.

Insight and access

For manufacturers, the prospect of an increasing number of sicker patients struggling with higher costs and limited coverage options is daunting, yet they need not face uncertainty alone or uninformed. As a distribution partner, AmerisourceBergen offers insight and access through its market economics and policy experts.

Despite hitting some roadblocks since being unveiled in May 2018, the Trump blueprint for reducing drug costs, titled “Putting American Patients First”, introduced proposed fixes to the U.S. healthcare system.

“It was the first time we had seen that level of momentum from both parties on drug pricing reform,” David Senior, SVP of Market Economics, said. “The solutions were still pretty high level at the time of the blueprint, but it’s certainly made us think that activity was coming, and that activity would have to be something we focus on.”

David Senior, SVP of Market Economics

AmerisourceBergen’s response can fit into two buckets, he said. The first was not to rush out and demand new contracts with its customers and suppliers, and instead look to modifying contracts for appropriate protections in due course during contract renewals. The second was to be prepared, and to the extent possible, model out ‘black swan’ events that could come as sudden jolts and have a significant impact on the market.

An example of such an event would be the passage of the Lower Drug Costs Now Act (H.R.3), introduced in September by congressional Democrats that, if passed, would allow the Department of Health & Human Services to negotiate the costs of 250 drugs each year and make improvements to beneficiary cost sharing, and among other changes, putting a cap on out-of-pocket costs for beneficiaries at $2,000.

“We’ve done the modeling about what some potential more significant changes across the entire supply chain could look like in terms of economic structures,” Senior said. “And those are things that we’re looking at but aren’t things that we are going act upon now because H.R.3 hasn’t gone anywhere. Still, we’re always trying to get ourselves and our partners ready for anything.”

In September, AmerisourceBergen began preparing its partners for some form of a conference agreement to make it to the president’s desk for signing by the end of the calendar year or the end of the legislative session. However, in light of recent political events in Washington, Stacie Heller, AmerisourceBergen Vice President of Policy, believes it is unlikely that will happen. The current Washington environment has given the policy and economic team time to focus on next steps.

Stacie Heller, AmerisourceBergen Vice President of Policy

“Certainly, there is a lot of discussion around having to do something,” she said. “Some of the proposals coming out of the administration are more drastic and could have a harmful effect on industry and innovation if we don’t come together and rally around something that could create positive change for all.”

Heller said she has begun to see some focus amid the political fog, noting that H.R.3 has made some movement despite likely hurdles once the bill passes the House.

“We are starting to see some bipartisan, bicameral ideas like higher reimbursement for biosimilars, as an example,” she said. “Part D benefit redesign is also starting to get some interest in both chambers and really in a bipartisan manner given the obvious patient benefit.”

Working the relationship

Though less headline grabbing than current political headwinds, the impact of drug pricing policy changes and added pressure on revenues could alter the relationship between wholesalers and manufacturers in a negative way. Though, Senior points out, that doesn’t necessarily need to be the case.

“There are other economic models we can explore with manufacturers to figure out how to meet their objectives,” he said. “Other supply chain, including pharmaceutical, markets around the world look and feel different than this one and yet they function effectively. I’m optimistic the U.S. is unique and will stay unique, but whatever happens, we will find a way to work together and figure out a productive path forward that maintains the integrity and value of this important supply chain.”

A recent success he points to is the rebate reform rule. Though it ultimately wasn’t implemented, it did establish AmerisourceBergen as a thought leader with solutions for policy makers and reinforced to its manufacturing partners that together they could come up with different models.”

“Because of our presence in Washington, we’ve forged new relationships with our partners—manufacturers and patient groups—to make sure our business model will allow them to remain viable in a new and shifting market,” said Heller.

To learn more about how AmerisourceBergen anticipates macro-economic and policy changes shaping how we do business and the role of distributors in the supply chain check out: https://www.amerisourcebergen.com/value-of-the-distributor

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