The so-called supercommittee's stupendous failure may have Washington and Wall Street wringing their hands, but pharma may actually be better off. Drug stocks are down this morning--along with everything else--but as Barron's points out, automatic spending cuts triggered by the committee's impasse aren't nearly as severe--nor as close--as the ones proposed during deficit-reduction talks.
Rather than immediate and large healthcare cuts, the triggered cuts would hit Medicare payments by 2%, beginning in 2013. "The bottom-line is that we avoid (for now) the bigger healthcare cuts that might have come under a larger-scale deal," Goldman Sachs analyst Jami Rubin said in an investor note, "which is a near-term positive for healthcare and particularly for hospitals and large-cap pharma that might have faced the most risk under a bigger deal."
Just think of the proposals bandied about by the folks on Capitol Hill. Rebates on drugs for Medicare patients that would also qualify for Medicaid would have amounted to 23% on branded meds and 13% on generics. Shorter exclusivity for biologics, a ban on pay-to-delay deals, incentives for faster-and-broader use of generics... the list goes on. PhRMA estimated the rebates alone would cost pharma $20 billion and 260,000 jobs. Those figures might overstate the case, but in any event, the proposals would have cost drugmakers, and soon.