Big Pharma Now Realizes It Got 'Snookered' Over Obamacare Exclusivity Deal

by: Derek Lowe

We haven't had enough controversy and arguing around here this week, have we? Let's talk politics for the morning, then. Here's a piece from a former VP for public affairs at Pfizer (NYSE:PFE), arguing that PhRMA got thoroughly snookered during the health care reform bill. He's looking over the current budget proposal:

"For biotech and pharmaceutical companies, the president’s budget repudiates one of the most important benefits of their 'deal' with the White House: the ability to market biotech drugs without generic competition for 12 years. The president would reduce that period to seven years, precisely the position of the generics industry and a position that the pharmaceutical industry had fought aggressively before it decided to make a deal with the president.

I worried about this sort of thing at the time, in the last post in which I had the nerve to bring up this issue. (In fact, if you go back and read some of the dissenting comments to that post, the 12-year exclusivity provision was listed as one of the main reasons the bill was a good idea for the industry). Even I didn't think my last paragraph would start coming true quite this quickly, though. (I'll note in passing that my worries about the "doc fix" were justified, too). And yes, it's true that the president's budget proposal is a political football, put onto this earth to be kicked around by all parties, and that nothing in it will necessarily turn into reality. But still - isn't that a rather short time to be about-facing on this provision? Less than a year?

There's an alternate explanation: that the 12-year provision was never really in there at all. We just thought it was! No, that wasn't marketing exclusivity at all, but data exclusivity. Or not - was it a mix of the two? What sort of mix? All sorts of people are writing to the FDA these days, telling them what they think the law actually means. Not that the agency is legally bound to listen to a word of it.

Even without any backtracking on exclusivity, the article maintains that health care reform was a loser for the drug industry. The author goes on on to detail the various other costs of the bill as it was passed, and then gets to the biggest structural problem:

"While the healthy part of the pharmaceutical market will be pounded, the government-run segment of the market, Medicaid, will be expanded by 16 million patients. Medicaid has the worst pricing structure and the worst track record in paying for innovations of any sector in the United States market. Like government health-care systems around the world, Medicaid must be dragged to pay for medical advances. Unlike employers and seniors in Part D, Medicaid patients cannot vote with their feet if their health plan does not provide the new medicines they want. The incentives in Medicaid all run against paying for pharmaceutical innovations."

So, Obamacare significantly expands the worst sectors of the pharmaceutical market while degrading the best.

Well, fine, you may say, this are quotes from an opinion piece at National Review, and what else would you expect but that they're opposed to the bill over there? But these issues would be worth thinking about even if they were squawked out by flocks of crows. I really do worry that the drug industry made a serious mistake by agreeing to the health care reform bill - not only agreeing to it, mind you, but committing large amounts of money to beating the drum for it and seeing that it got passed. And that means that PhRMA made a serious mistake by putting Billy Tauzin in charge of that effort. Perhaps a backslapping deal-maker wasn't what was needed?

Okay, that gets politics out of my system for a bit. The whole health care reform bill is going to end up in the Supreme Court anyway, on Commerce Clause grounds, so arguing about specific language may turn out to be a waste of time. But while I'm in the mood, though, I'll close with (what else?) a quote from Barry Goldwater:

"A government that's big enough to give you everything you want is big enough to take it all away."