Six Ways the Court's Affordable Care Act Ruling Impacts Biotech

While pundits, politicians, and press debate the long reaching societal impact of the historic Supreme Court ruling upholding the Affordable Care Act (ACA) yesterday, let's look at six specific practical implications of the ruling on the biotech and biomedical sectors.

(1) Business Certainty

One obvious impact is certainty. Getting ACA approved required extensive negotiation with the pharmaceutical, biotechnology, and biomedical industries in 2010. Drugmakers agreed to $80 billion in fees and rebates over the first 10 years to help fund ACA. In exchange, the pharma/biotech industry anticipated additional revenue from more Americans being covered by health insurance, and also obtained a number of concessions such as regulatory changes around biosimilars (see below). Regardless of the level of satisfaction for the final deal, most of the industry did not want to revisit these discussions which would have been likely if the insurance mandate was lost.

(2) Rebates and Costs vs. New Revenue

While the ACA universal mandate doesn't take effect until 2014, the Wall Street Journal reported that, by the end of this year, pharma/biotech will have already paid over $5 billion in fees, and lost $3.5 billion in sales discounts to cover the Medicare Part D "doughnut hole" since implementation of the ACA. While there was concern these fees may exceed the $80 billion anticipated in the first 10 years, the Court's ruling that the government cannot penalize states that do not expand their Medicaid programs certainly didn't help. It was estimated that an additional 17 million Americans would be added to Medicaid but, as a result of the Court's ruling, this number may be significantly reduced as some states opt out of the plan. The pharma/biotech industry will need to bear this loss.

(3) Expedited Approvals of Biosimilars

The Biologics Price Competition and Innovation (BPCI) provision in ACA expedites approval of biosimilars--generic versions of drugs produced using biological processes. As described on this blog back in February, this new process is just being implemented and the provision remains in effect. Europe has a thriving biosimilars market and as this overview from Frost and Sullivan describes.  BPCI should help create a similar market in the US making more of these sort of medicines available faster and at a lower cost.

(4) IPAB Remains Intact

The Court's ruling also maintains the Independent Payment Advisory Board (IPAB) established as part of the ACA. Some in the industry have concerns about this panel. For example, the Biotechnology Industry Organization (BIO) activity advocates disbanding this Board, citing concerns that the, "IPAB could enact broad changes to Medicare without Congressional oversight" and limit access to drugs.

(5) Medical Device Tax

Starting January of next year, biomedical device manufacturers will have to pay new 2.3% tax on medical devices that is expected to collect $29 billion over the next 10 years to support ACA. While the industry is still trying to overturn this provision, it seems unlikely to change.

(6) Impact on Biomedical Research

In addition to aspects directed toward the biotech and biomedical industries, provisions of ACA that affect general biomedical research and drug discovery also impact pharma/biotech. The Nature News Blog provides a good overview of how ACA programs designed to accelerate the development of new effective drugs.