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In uncertain times, manufacturers and government tackle disruption

The only thing certain about 2020 has been uncertainty. A global pandemic triggering an economic downturn and upending daily life as a rancorous presidential campaign nears its conclusion has left most everyone in a state of confusion and wondering what might come next.

Yet, despite the uncertainty, the arrival earlier this year of COVID-19 galvanized the relationship between policymakers and drug manufacturers and distributors as all sides worked together to tackle shortage risks caused by massive demand surges across the health care supply chain. They also started looking toward the future.

“It was an ‘Aha!” moment,” Brad Tallamy, Senior Director of Government Affairs for AmerisourceBergen, said. “Before COVID-19 you might have had a dozen policymakers who realized that about 70% of APIs (active pharmaceutical ingredients) and about 50% of finished generics were manufactured overseas.

“All of a sudden COVID-19 hits the United States and people are asking ‘why aren’t more medications made here… strategic national stockpile, what’s that’?”

“From March 12 – the day the Coronavirus was declared a global pandemic – to March 15 – when stay-at-home orders started rolling out across the country – we saw a tremendous ordering surge, especially as pharmacies looked to fill 90-day prescriptions for their patients” said David Senior, Senior Vice President of Market Economics at AmerisourceBergen. “We went from distributing around 4 million products on March 12 to nearly 6.5 million by March 15. A nearly 50 percent increase in a matter of days. It definitely pressure tested the system.”

Almost overnight, meetings on Capitol Hill that used to take months to schedule were being held the same day the phone rang. Well known as thought leaders in the healthcare industry, most recently for their insight on the rebate reform rule, AmerisourceBergen’s market economics and policy experts were offering insight and solutions to both sides of the aisle. Within the first three months of the crisis, the group estimates they attended more than 100 virtual meetings with Congressional leaders and their staff.

Initial requests were for supply chain logistics information related to medications in shortage and personal protection equipment. Then shortages and protecting workers quickly turned to addressing the financial crush on front-line businesses like pharmacies, clinics and provider offices that were experiencing lower patient visits due to lockdowns across the country.

Policymakers needed to understand not only how the supply chain worked for patients to receive necessary medications, but how sites of care that distribute those drugs need to be reimbursed to stay afloat, particularly through economic uncertainty.

Finding common ground

Despite the politicization of the pandemic and the current polarization both within and outside the Beltway, policymakers did come together to address the immediate needs through relief packages as well as addressing or amending federal healthcare programs, if even for the short-term. And to support the long term, policymakers began taking an interest in improving the supply chain for the future.

“We were gratified to see a bipartisan bill introduced in Congress recently—the Essential Medicines Strategic Stockpile Act—about establishing a new stockpile of essential drugs and equipment that really does get at both demand and supply driven shortage issues,” said Senior.

Still, there is a long way to go in fighting COVID-19 and shoring up supply chains as new treatments like Veklury (previously Remdesivir) are rolled out and vaccines that kill the virus are on the horizon. Once approved, the healthcare supply chain will be integral as hundreds of millions of doses will have to be manufactured, distributed and administered at pharmacies, clinics and hospitals. It will be an enormous public/private logistics effort.

“We still have work to do to make sure pharmacies are in a position to not only vaccinate people but are also appropriately reimbursed for their services,” said Tallamy.

As if a pandemic weren’t enough, controversial issues like drug pricing and the possibility of a repeal of the Affordable Care Act (ACA) continue to loom over the healthcare industry and the nation.

The U.S. Supreme Court—most likely consisting of a conservative majority with the expected appointment of Judge Amy Coney Barrett—is scheduled to hear arguments in November that could result in the ACA being struck down.

According to a report issued by the Health and Human Services Administration in 2017, up to 133 million Americans, which equates to about half the U.S. population under the age of 65, have pre-existing medical conditions that could prevent them from getting health insurance if the ACA is eliminated. On top of that, more than 8 million people in the U.S. have contracted COVID-19 to date. Many who become seriously ill with the virus may have long-lasting medical implications that are not yet fully understood.

“The idea that it (the ACA) could get repealed and not get replaced has seemed like such a remote possibility,” Senior said. “It just seems a bit mindboggling that it could get repealed and 20 million people are going to lose their healthcare during a pandemic. However, given what’s happening with the Supreme Court and if the law is struck down, it seems equally inconceivable that policymakers could come together to replace it quickly.”

Possible outcomes from a high court decision not likely to be delivered until the middle of 2021 are that only the individual mandate is struck down, which would have little impact as Congress repealed the penalty aspect of the law in 2017; the mandate with insurance protection on life-time caps and pre-existing conditions could be eliminated, which would unsettle the financial markets; or the entire law could be ruled unconstitutional, which would result in millions losing their healthcare.

A looming election

Complicating a legislative response to any of those scenarios is the outcome of November’s contentious presidential election. A divided Congress has struggled to pass any measures addressing the law. In the past decade, although Republicans have voiced opposition to the ACA, they haven’t agreed on a replacement, and Democrats have been split in terms of some party members believing the ACA didn’t go far enough.

If it is struck down there will be a huge impact on patient outcomes and access to critical life-saving pharmaceuticals, said Tallamy.

“It probably wouldn’t happen overnight, perhaps the court might set a six-month transition, but we would see a reversal,” Senior said. “I’m not sure it upends the industry, but it certainly would change economic formulas, and it would definitely be a drag on the healthcare industry and patient access and affordability.”

The other major issue confronting policymakers is drug pricing.

“In February the thinking on the issue was that it wasn’t a question of if drug pricing legislation would happen it was about how far it would go and what would be the ripple effect across the industry?” Tallamy said. “Then COVID-19 hit and policymakers said, wait a minute, this innovation may literally save the world…so maybe we should pump the brakes on drug pricing.”

Yet, by June the AmerisourceBergen policy team was seeing studies indicating Americans continued to worry about the price of drugs. A concern partly fueled by anxiety caused by the crisis that pharmaceutical companies would take advantage of the pandemic to raise prices.

Drug pricing has always been a balance between consumer costs versus novel innovations.

“The conversation had mostly been focused on the manufacturers' pricing side where the public has more of an interest on their own out-of-pocket costs,” Senior said. “We are hopeful that any sort of legislation in the future falls more toward alleviating patient out-of-pocket costs, which affects access and outcomes.”

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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