With the failure to come up with an alternative to Obamacare, Congress has left drug companies in a more precarious position. The goal was to make health care more free market oriented and less government controlled. That would have created more competition among health care providers and insurance companies. Patients would have more choice and more responsibility to use their health care dollars more wisely.
Proponents of Obamacare say more free markets would mean less guarantees of coverage. The Congressional Budget Office has said the Republican plans would have led to many millions losing coverage. I do not want to take sides here. I will say that we do need a compromise that gets votes from both sides to have a long term plan that can endure changes in party control. Obamacare is helping many patients with pre-existing conditions, while hurting many others who are paying higher premiums with super high deductibles. This cannot go on as we are all paying too much for coverage. Our plans are increasingly becoming useful only for major illnesses, not covering routine expenses.
How do drug companies fare in this failure to repeal Obamacare? I am afraid they will now be a target for both parties as a driver of increased premiums and higher deductibles. Congress will have to deal with these issues and will look to drug companies to cut costs. Single payer will not pass, but we can expect to see more government involvement in pricing. Bernie wants reimportation from Canada which he says will save consumers $7 billion a year. He and many others want Medicare to have negotiating power with drug companies. Others in Congress want to end DTC or use tax policy to make it a non deductible expense.
California wants to legislate a notice period for drug price increases and mandate insurers tell them what percent of premiums are the result of drug costs. Other states will also try to add measures to embarrass drug makers with marketing disclosures.
Most patients will support measures against drug makers. We all want lower costs. Few patients understand the industry arguments that innovation justifies higher prices. While most Congressmen understand the need for a profitable drug industry, many think that profit is excessive and will be willing to cut that level of profits. Bernie thinks he knows how much is a fair profit and is perfectly willing to risk innovation for Canadian level prices.
DTC will likely weather the political storm because of commercial free speech provisions. The question is will drug companies voluntarily stop DTC if Congress demands it as a price to prevent reimportation or Medicare price negotiations. Drug makers will do what they need to to keep free market pricing. Unfortunately that means DTC is vulnerable to horse trading.
Drug companies like using DTC and its expanding use is proof they get a good ROI. Remember, however, that DTC spending is only about 1% of US Rx sales and might drive about 2% of sales. It is true that some brands are driven heavily by DTC but most establish 90% of their sales through physician promotion. So, can the drug makers stop DTC and still be successful? Most brands can and will adapt to a no DTC world.
My conclusion is the advertising lobby will prevent any punitive provisions affecting DTC. After all, the same media companies who bash drug companies regularly in their news coverage depend on DTC ads for a large portion of revenue. What is clear is the risk of those DTC restrictions are higher than ever before and we in the drug advertising world must stay involved in defending DTC as a positive force for educating consumers.
President-Elect Trump nominated Georgia Congressman and physician Tom Price to head Health and Human Services. This move proves Trump is very serious in his goal of dismantling Obamacare. Dr. Price has offered a plan in the past very different from Obamacare. I think this is move in the right direction and will eventually improve quality at lower cost.
In Price’s plan Americans would have more free market options to shop for coverage. They would be able to buy insurance across state lines, increasing their choices and hopefully getting lower premiums. There would be tax credits for health insurance purchases differing by age. All the government mandates on what a policy must cover would go away.
Consumers could choose a bare bones catastrophic plan or pay for a comprehensive one. Health savings accounts would increase to shift health care decisions to consumers. In Dr. Price’s view consumers would still be able to purchase coverage with pre-existing conditions but at a premium if they currently do not have coverage. His goal is to encourage continuous coverage and not to have people buy insurance only after they are sick.
Dr. Price basically wants to take the Federal government out of the insurance business by creating more options using free markets. Medicare would stay but Dr. Price wants to allow participants some options to go outside of the system. Critics worry that any options to use money outside of Medicare approved providers would weaken the system. Any inkling that Medicare might be privatized scares Democrats greatly. Republicans want to look at options for younger people knowing that Medicare may not be sustainable long term.
Of course Dr. Price will need to alter his past proposals to whatever Mr. Trump and Congress will agree to. There is no evidence Mr. Trump wants to change Medicare. He also has said recently he likes certain provisions of Obamacare on pre-existing conditions and children up to 26 staying on their parent’s policy.
It is very clear that we will see Dr. Price be implementing a consensus plan that reduces Federal involvement and loosens requirements for policies. The Price philosophy is to give consumers more responsibility for their coverage and they will have more involvement in cost/benefit of care. The idea that someone else pays has created much unnecessary care. We have never really had a free market for health care in recent times. A true free market where consumers have transparency in what they are paying for and at what price will help control costs.
The fear that consumers will be without any coverage is overblown. People who currently have coverage on exchanges will likely have several years to convert to the free market system. While it is true that many Americans can now get subsidized coverage, we as taxpayers are footing a high bill that is rising rapidly. Those who buy on the exchanges who are not subsidized are seeing very large premium increases. Things need to change.
Whether the Trump plan is the answer to providing quality care at reasonable prices will be tested. I do know that the Obamacare plan needs to be dramatically changed as it is unaffordable. Trying free market solutions will get consumers to care much more about what medical services they need and at what cost. More involved consumers using their own money will hopefully lead to a wiser use of services and force providers to compete more on price/quality.
Appealing to millennials is difficult enough for most industries, however the health insurance industry specifically struggles, as millennials feel invincible, and would rather diagnose themselves through Web MD than visit the doctor. Steve McCallion, CMO and creative director at Zoom+, recognizes this, and has developed a new approach to targeting millennials. McCallion says, “millennials are a healthy group, so you have to figure out how they think of their healthcare on a deeper level…not just something they have to do, but they want to do”. The team at Zoom+ emphasizes the millennial love for wellness, by offering incentives for healthy lifestyles, such as running a marathon. They know this younger age group is much more concerned with eating healthy and staying active than seeking medical intervention. One of their first campaigns was an animation, reminiscent of Schoolhouse Rock! The idea was to take the lengthy and confusing language of the ACA, and put it into a platform that millennials can relate to and understand.
To learn more about how Zoom+ is engaging millennials from MM&A, click here.
It is finally over. We have a new President elect. We have a relatively unchanged Senate and House. What does this mean for the DTC Industry? Both candidates were critical of the drug companies during their campaign. President-elect Trump has not said anything about DTC, but he has called for price negotiations with drug companies for Medicare. That would greatly affect drug company profit margins and result in R&D and marketing cuts.
My fear is that there will be lots of bi-partisan support for negotiating price. It may be too hard to say no from a Congress anxious to show its populist bent. The drug lobby may be able to convince Trump that cutting their prices through government negotiations has negative consequences on R&D investment. I doubt Mr. Trump has given the drug business much thought beyond his general comment that billions can be saved through tough negotiations.
The good news for drug companies is there will be a move towards less regulation. I also expect an FDA that is quicker to act on drug approvals. Clearly Trump will want both drug companies and device makers to get cost effective drugs out to the marketplace faster.
Now what about Obamacare? It has proven to be a difficult program to afford for many Americans. Despite the high cost, most of those insured under it will still want access to insurance. Trump will push for more free market options including opening up the insurance market nationally. He will likely have a subsidized program for Americans with pre-existing conditions.
DTC will survive any changes instituted by President Trump. While prices may be pressured to stay lower, I do not think Trump and his business advisors want to kill the drug industry through punitive regulations. Trump is not Bernie Sanders who wanted to punish “evil” drug companies. I am hopeful that a free market oriented approach to health care will be good for America. Opportunities will be plentiful for companies promoting evidence based approaches to delivering care more efficiently.
The Republican Senate and House should be relatively drug company friendly as long as they are not seeing sharply rising prices. The drug companies must exercise some restraint by keeping price increases related to inflation or other justifiable costs. A Trump presidency is highly unpredictable so I expect drug makers to face some uncertainty in the short term.
Let me cite a headline in a recent 5/27 Associated Press story. “Superbug resistant to last-resort antibiotic found in the United States.” For the naïve critics who want to hammer drug companies who do you think will develop new antibiotics? Will it be the same caliber folks who run the TSA? The Post Office? The Veterans Administration? There are good people in government for sure but they are not wizards when it comes to finding new drugs.
I am afraid that Hillary and Bernie are going to need their hated drug industry to stop us from dying from a bacterial infection from a routine scrape, cut, or infection. I think most Americans have this media driven view that heroes working for government discover cures. Television and movies are filled with CDC or university scientists who discover cures to stop pandemics. Well my friends a Brad Pitt character is not going to save you from Zika or a new plague. The heroes will be named Pfizer, Glaxo, Merck and Sanofi. Of course those working there are never the movie heroes.
Government is very bad at solving problems. They could not develop a web site to enroll Obamacare patients. Do you really think they will save your butt from resistant bacteria? So I gladly support high profits for incentives to develop new antibiotics and vaccines. Incentives work Bernie. You may think drug profits are outlandish but your Medicare for all will guarantee we strip incentives away for break through drugs. It sounds nice to have cheap drugs for all until we get a superbug that none of those price controlled drugs can kill.
Bernie will say we can create some new government funded research organization to do drug development without the dastardly profit motive. With the bureaucratic operation we have seen in government, it is likely that organization will be slow, inefficient, and attract the least talented scientists.
Next time a candidate says drug companies make too much money think again. They actually will keep you alive. You know who makes outlandish profits? How about Hillary charging a university $225,000 for a canned speech. How about George Clooney getting $20 million for a movie role? But drugs are different they say. They are needed to save lives and should be cheap. Yes, they do save lives and that is why we should be happy to provide fantastic incentives to keep us alive.
The nice thing about free market pricing is that in the next pandemic drug companies will supply the good old USA first. The price controlled economies will get what they pay for and will have to wait in line for new cures. Americans may complain about drug prices but will be thankful their money provides incentives to drug companies to keep investing in cures.