WSJ: Drugmakers Will Pay Billions in Fees, Price Cuts Due to Healthcare Ruling

Thursday, 28 Jun 2012 01:01 PM

By Nancy Stanley

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The Supreme Court’s decision to uphold Obamacare gives drug companies more certainty, The Wall Street Journal reported, even though drugmakers will spend billions of dollars in fees and price cuts.

Beginning in 2014, individuals will be required to have health insurance coverage or pay a penalty. According to The Journal, the pharmaceutical industry mostly supported the legislation, as the individual mandate will allow millions of people to be able to afford prescription drugs because they will have insurance.

Earlier this month, John Lechleiter, chief executive of Eli Lilly & Co. and board chairman of the industry trade group Pharmaceutical Research and Manufacturers of America, said, "We know what that road looks like."

However, analysts predict that any increased sales from more people being insured would be offset by the approximately $80 billion in rebates and fees the drug companies agreed to pay during 10 years to assist in funding the law.

Healthcare consulting firm Avalere Health LLC expects the fees and other costs to total $105 billion, The Journal stated.

According to Moody’s Investors Service data cited by The Journal, the pharmaceutical industry paid $2.5 billion in fees last year and is expected to pay $2.8 billion in 2012.

The law also includes provisions for the launch of biosimilar drugs, which are lower-cost versions of expensive, complex drugs known as biologics. Although some companies will lose sales because of biosimilars, large drug companies, including Amgen Inc., Pfizer Inc. and Novartis AG, have been developing their own biosimilars.

"We thought the law is negative" for drugmakers, Michael Levesque, a pharmaceutical analyst at Moody's told The Journal. "And [the law] remains in place."

Levesque noted that the biggest benefit for drugmakers of the ruling is that the uncertainty and risks that would have followed from overturning the legislation are reduced.

Meanwhile, the National Retail Federation (NRF) said the High Court’s Obamacare decision will punish businesses of all sizes.

“As the voice of retailers of all types and sizes, we’re disappointed by today’s ruling. The Court missed an opportunity to redress the many shortcomings of the law," NRF President and CEO Matthew Shay said in a statement.

“As it stands, the law wrongly focuses more on penalizing employers and the private sector than reducing health costs. For these reasons, NRF has been a consistent skeptic of the Affordable Care Act."

Costs will rise for retailers, which will hurt the economy.

“Although the Court upheld the law’s constitutionality, many problems remain: it penalizes employers too much; it doesn’t do enough to reduce the cost of healthcare; and it is unreasonably complicated and difficult to implement and administer," Shay said in the statement.

© 2014 Moneynews. All rights reserved.

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