Re-election of President Barrack Obama for another four year term, no doubt, sends a clear signal to all concerned that full implementation of the ‘Patient Protection and Affordable Care Act’ of America, which is also known to many as ‘Obamacare’, will keep staying on course powered by passionate and unflagging enthusiasm of the head of state of the most powerful nation of the world. More so, when it has passed this year even the strict scrutiny of the Supreme Court of the country.
Re-elected President will now have no apprehension that this Act will be repealed, as many predicted a Mitt Romney win could mean a reversal or at least a slower adoption of the new healthcare reform process in the U.S.
That said, it is also clear, although President Obama will get another four years in the White House, Republicans will control the ‘House of Representatives’ and the Democrats will control the ‘Senate’, making the job of the re-elected President indeed tougher. Moreover, much anticipated ‘fiscal cliff’ of the country could pose even a greater challenge to fully fund the ‘Affordable Care Act’, the way it has been crafted by the U.S government.
Let us now have a brief and a quick review of the ‘Obamacare’.
After getting elected for the first four year term as the President of the U.S, Barrack Obama championed enactment of the historic healthcare reform legislation – ‘Patient Protection and Affordable Care Act’ fulfilling his election campaign pledge deftly to ensure healthcare for all American. The center piece of this legislation was aimed at providing health insurance benefits to another around 34 million poor and uninsured Americans.
The key highlight of this Act is that it will compel the insurers to extend insurance to even those with any pre-existing illness and impose stringent criteria on expenditure towards medical treatment to cut healthcare costs.
‘Patient Protection and Affordable Care Act’ is expected to cost around US $940 billion over 10 years to the U.S Government. To partly recover this cost, Obama administration had already proposed new fees to the healthcare and pharmaceutical companies along with a new tax for the high income groups.
Thus, so far as the new path-breaking healthcare reform process in the US is concerned, President Obama has ‘walked the talk’ and even ‘talked the walk’.
‘Obamacare’: the key features:
|US$ 940 billion over 10 years. Expected to reduce projected federal budget deficits by US$ 143 billion by 2019
|95% people would gain coverage, leaving 22 million uninsured
|Most provisions would take effect in 2014
|Sources ofFunding:New Taxes
|• Tax on high-income earners• Tax on “Cadillac” health plans• 10 year industry fees imposed on:1. Insurance Companies
2. Medical Device Manufacturers
3. Drug Makers
|Penalty: People without coverage would pay a fine of $ 95 in 2014, which would rise to US$ 695 or 2.5% of income, whichever is higher by 2016.
|Penalty: Raises the fee that employers must pay if they do not provide insurance to US$2,000 per employee. Also, exempts companies from paying the fee for the first 30 employees.
|Small businesses can immediately apply for tax credits of upto 35% of their contributions toward employee health insurance premia. Beginning 2014, these tax credits will cover 50% of contributions toward employee premia.
|Fraud and Abuse
|Deterrence / Civil and Criminal Penalties: Penalties increased to US$ 50,000 for each false statement or misrepresentation.
‘Medicare’ plan of America:
According to the explanation of the program given by Medicare, it is a prescription drug benefit program. Under this program, senior citizens purchase medicines from the pharmacies. The first U.S$ 295 will have to be paid by them. Thereafter, the plan covers 75 percent of the purchases of medicines till the total reaches U.S$ 2,700. Then after paying all costs towards medicines ‘out of pocket’ till it reaches U.S $ 4,350, patients make a small co-payment for each drug until the end of the year.
Some arguments in favor of the Act:
The following are some arguments in favor of the Act:
- More security to the lives of so many Americans
- Will protect against worst practices of insurance companies
- Will give chance to uninsured and small businesses choose an affordable plan from a more competitive market
- Every insurance plan will cover preventive care
- Reduce cost of premium because of intense competition and regulations
- Would bring down the deficit by US$ 1 trillion.
Some arguments against the Act:
At the time of the enactment of the new law, following were some arguments against ‘Obamacare’:
- Goes against popular wisdom
- Complex – difficult to implement
- Appeasement to Insurance Companies
- A ‘Political Suicide’
Immediate impact of the Act on US Pharmaceutical Companies:
Following were the reported immediate impact of the Act and reaction of the U.S Pharmaceutical Industry in 2009-10:
- Overall adverse impact on sales & profit due to higher rebates on drugs sold through “Medicaid” Program
- 50% discount for patients in “Medicare” part D Program
- J&J, Eli Lilly, Abbott, Amgen and Gilead gave guidance on adverse impact on 2010 performance
- Companies with high US sales dependency like, Forest, King, Cephalon, Amgen and Shire were expected to be the biggest losers
- Bayer, Sanofi, Novartis and Roche were expected to have lesser impact
US Pharmaceutical Industry pledged US $ 80 billion towards healthcare reform of the nation:
Despite adverse financial impact as indicated above, it was reported that the U.S Pharmaceutical and Biotech Companies had at that time offered to spend US $ 80 billion to help the senior citizens of America to be able to afford medicines through a proposed overhaul of the healthcare system of the country.
This was a voluntary pledge by the U.S pharmaceutical industry to reduce what it will charge the federal government over the next 10 years.
Though many experts had said, without this gesture the adverse financial impact on the U.S pharmaceutical companies would have been much more.
US citizens’ support:
Despite some skepticism around, a leading U.S daily reported that American citizens overwhelmingly support substantial changes in the country’s healthcare system and are strongly behind a government run insurance plan to compete with private insurers.
According to a New York Times/CBS News poll, majority of Americans would be willing to pay higher taxes so that every individual could have health insurance. The survey also highlighted that Americans, by and large, feel that the government could do a better job of holding down healthcare costs as compared to the private sector.
Current American healthcare: High quality – high cost
85 percent of respondents in the above survey at that time indicated that the country’s healthcare system should be completely overhauled and rebuilt. The poll also showed that American citizens are far more unsatisfied with the cost of healthcare rather than its quality.
President Obama has been repeatedly emphasizing the need to reduce costs of healthcare and always believed that the healthcare legislation is absolutely vital to American economic recovery. 86 percent of those polled in the survey opined that the rising costs of healthcare pose a serious economic threat to the country.
Another interesting study:
Another study conducted by the ‘George Washington University School of Public Health and Health Services’ reported that as a part of the new healthcare reform initiative in the U.S, if the health centers are expanded to cover from the current 19 million to 20 million patients, the country can save US$ 212 billion from 2010 to 2019 against a cost of US$ 38.8 billion that the government would have incurred to build the centers. This is happening because of lower overall medical expenses for these patients.
Impact on Indian generic business:
‘Obamacare’ was always considered to make a positive impact on India in general and the domestic Indian pharmaceutical players in particular, because of the following reasons:
- U.S is the largest generics pharmaceutical market of the world
- The Act promotes use of generic drugs boosting the growth opportunity of the market further
- India produces around 20 percent of the global requirement for generic drugs by volume
- Indian companies account for over 35 percent of the ANDAs as more and more branded drugs are going off-patent
However there is also a flipside to it, as follows:
- Increase in demand will attract more number of generic players to compete
- Will attract more MNCs in generic business having stronger marketing muscle power
- Intense cost competition
- Severe pressure on margin
Impact on Indian Bio-similar Drug Business:
Though a pathway for entry of biosimilar drugs is now in place in the U.S, 12 year ‘Data Exclusivity (DE)’ could pose to be a serious market access barrier for such products. However, some experts believe, since biosimilar opportunity in U.S comes in 2015, many such drugs developed in India will cross 12 year exclusivity period by then.
Keeping an eye on this emerging opportunity many U.S biotech companies are now looking for low cost bio-manufacturing destinations, like India.
Impact on Indian BPO opportunities:
The following are the expected positive impact on the ‘Business Process Outsourcing (BPO)’ opportunities in India:
- Around 35 million more Americans coming under insurance cover would mean as many new enrollment and transactions
- Will require more customer support services, as the healthcare reform makes digitized records mandatory in the country
- Currently less than 30 percent physicians in the U.S have Electronic Health Records (EHRs)
- Conversion of archival data into compatible formats (data entry, validation, maintenance) is a must now
- Online submission of applications through payors’ portal has commenced
- High volume claim adjudication is expected to follow
However, here also there is a flipside to this opportunity due to the following reasons:
- ‘Regulatory’ and ‘Privacy’ concerns related to patients’ records
- Detail knowledge of medical procedures and codes
- Variation between the states within USA
Expected Volume of BPO Business:
The U.S Government is likely to spend around US$ 15-20 billion on healthcare technology services alone and bulk of the business is quite likely to come to India, unless President Obama finally decides to discourage outsourcing opportunities through domestic tax measures.
Currently the size of India’s outsourcing industry is estimated to around US$ 70 billion, telecom, banking, financial and other customer services being the main BPO demand from the U.S. Healthcare BPO now represents reportedly only around 5 percent of the total business, though with an ascending growth trend.
Sensing the emerging opportunity, various call centers, medical record transcribers and software developers among others, have already started building commensurate capacities. India’s big outsourcing firms are also expanding their operations in the US.
Interestingly, it has been reported that ‘Obamacare’ could probably be India’s biggest BPO bonanza yet – bigger than even Y2K.
Closer home, during the new U.S healthcare reform initiative, Indian Prime Minister Dr. Manmohan Singh reiterated in his speech delivered at the 30th Convocation of PGIMER, Chandigarh on November 3, 2009, the dire need of the country to strike a right balance between preventive and curative healthcare for the common man. The Prime Minister articulated his thoughts as follows:
“ We must also recognize that a hospital centered curative approach to health care has proved to be excessively costly even in the advanced rich developed countries. The debate on health sector reforms going on in the U.S is indicative of what I have mentioned just now. A more balanced approach would be to lay due emphasis on preventive health care”.
However, the Prime Minister of India has not walked the talk, not just yet.
When the world believes that comprehensive healthcare reform measures to provide access to affordable, high quality healthcare services covering the entire population of the country is fundamental to economic progress of any nation, the government of India seems to be keeping its ‘Universal Health Coverage’ initiative still on the drawing board, engulfed by controversies, debates and posturing by different key elements.
If and when the ‘Universal Health Coverage’ initiative will see the light of the day in India, all stakeholders including the pharmaceutical industry will hopefully come forward with their own slice of contribution, just as what happened in the U.S, to ensure access to affordable high quality healthcare to all the citizens of the country.
Be that as it may, a photo-finish win, as it were, of Barrack Obama for the second four year term as the President of the United States, assures all that ‘Obamacare’ stays on course for the Americans, extending its significant spin-off benefits to India and well deserving a ‘thumbs-up’ from the stakeholders of the country .
By: Tapan J Ray
Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.