Wednesday, February 11, 2009

Healthcare Reform – Will Big Pharma Get a Reprieve?

Has Big Pharma gotten a temporary reprieve from threatened reforms from President Obama? Last week’s withdrawal by Tom Daschle from consideration as the Secretary of Health, Education, and Welfare and his office’s admission that there was no immediate replacement doesn’t bode well for quick reform.

Also, given the problems President Obama is having gaining bipartisan support for a stimulus package that everyone agrees is needed, think what will happen when he tries to push healthcare reform through the Houses of Congress.

A cynic might say that Treasury Secretary Timothy Geithner was approved despite his tax problems because everyone felt that he was the man and this was his moment. The same cynic might also say that Tom Daschle knew that Congress wasn’t ready for him and this was certainly not his moment.

What does this mean for Big Pharma? One pending issue that some of us have been writing about is what happens when President Obama gives the go ahead to Medicare to negotiate volume purchase discounts for prescription drugs with the pharmaceutical companies. Revenues will certainly contract. I don’t think volume increases will offset the price decreases unless there is a new, national commitment to really overmedicating the country.

Now, if the Obama Administration is too distracted to go after healthcare reform then Big Pharma may get a temporary reprieve this year. This will be a good thing for Big Pharma. Many drug companies have major patents expiring this year and their replacements are not exactly setting the world on fire. Getting pounded on their remaining products would not have been a good thing.

I’m going to stick my neck out and say that this year’s, 2009’s, revenues will probably be safe from Federal tinkering. Going a little further out, 2010 and beyond, I think the risks increase significantly. Here’s why. First, the economy is not going to improve any time soon. The Republicans are on the defensive and when their constituents start screaming about government assistance because they’ve lost their jobs, homes, savings, etc. then we will really start to see bipartisan support. Especially, as we start to draw closer to the midterm elections in 2010. Next, once the Federal government really lets loose and starts to spend, someone’s going to realize that we’re spending too much. That means other someone’s are going to start finding places to save money. Medicare spending for prescription drugs is a great place to start. Even John McCain hates Big Pharma. I recently saw an article which indicated that the Obama Administration is reviewing the U.S. nuclear arsenal. They’re getting serious. The sacred cows are going to be gored.

Big Pharma’s going to have a tough year in 2009. President Obama’s current troubles may buy them a little time but it will come back with a vengeance next year.

As always, we welcome your feedback. Please contact us at We look forward to hearing from you.

Contributed by Guy de Lastin

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