US Healthcare Bill's Failure Could Have Unpleasant Ripple Effects For Pharma

Having sat on the sidelines during the unsuccessful effort to repeal and replace Obamacare, the pharma industry may find the rest of its legislative agenda, from taxes to even user fee reauthorization, could become more difficult.

The US pharma industry tied to remain as quiet as it could during the Republican's recent effort to repeal and replace the Affordable Care Act (ACA), also known as Obamacare. Having actively worked with Democrats to develop elements of the original legislation, only to see that effort go unrewarded in terms of how the industry was viewed by Democratic politicians or the public at large, staying on the sidelines when the repeal effort geared up seemed the most prudent course of action.

But after the repeal and replace bill was pulled from consideration on the House floor March 24 when it became clear Republicans did not have enough votes, the pharma industry needs to think anew about legislative treats and possibilities, and how best to work with a President and Congressional leadership who have been smudged by their failure to get the bill passed.

Most immediately, it looks like US manufacturers will have to live with the Affordable Care Act's annual pharmaceutical tax now that the House bill is dead. The bill, known as the American Health Care Act, would have repealed the pharma tax along with a number of other taxes established by the ACA.

And it appears there won't be another opportunity to address the tax in an ACA repeal bill any time soon. House Speaker Paul Ryan, R-Wisc., and President Trump did not express any enthusiasm for renewing efforts to create a bill and said they will turn to other legislative priorities now.

Leading Democrats in Congress had challenged repeal of the tax by asserting it would cause increases in Medicare Part B premiums.

"We're going to be living with Obamacare for the foreseeable future," Ryan said in a press conference after plans for a vote were scrapped.

Repeal of the annual pharmaceutical tax was one clear benefit to industry offered by the bill. It also envisioned major changes in Medicaid funding and eligibility, which might have led to changes in the rules for drug coverage under the Medicaid rebate program. (Also see "Medicaid Block Grants: Allowing More State Flexibility To Limit Rx Coverage?" - Pink Sheet, 22 Mar, 2017.)

"Now we'll move on with the rest of our agenda," Ryan added. "We have big ambitious plans for improving the lives" of Americans.

In a statement from the White House, Trump said the next chance for a bill will be after the ACA "explodes" and Democrats "get together with us" and create a "truly great" health care plan. "I'd be totally open to it," he said. "Perhaps the best thig that could happen is what happened today, that we'll end up with truly great health care bill in the future once things fall apart."

Tax Repeal Would Have Saved Industry $28.5bn

Repeal of the pharma tax would have saved manufacturers a total of $28.5bn from 2017 to 2026, according to estimates by the Congressional Budget Office.

A total of $3bn is scheduled to be collected from industry in 2017. The amount of each company's tax is based on its market share in government insurance programs. Revenues from the annual tax are credited to the Medicare trust fund and support the Part B program.

Leading Democrats in Congress had challenged repeal of the tax by asserting it would cause increases in Medicare Part B premiums.

Premiums would rise an aggregate $8.7bn through 2027, based on estimates from the Centers for Medicare and Medicaid Services Office of the Actuary, Sen. Ron Wyden, D-Ore., and Rep. Frank Pallone, D-NJ, announced in a March 22 press release.

The repeal "would result in an increase in the standard Part B monthly premium rate of roughly $1.30 from 2020 through 2027,” a CMS spokesperson added in an email.

Republicans will focus next on tax reform, Ryan and Trump said. But both acknowledged that will be harder to accomplish without a win on the ACA repeal.

"This makes tax reform more difficult," Ryan conceded.

Pharma of course, really likes the idea of tax reform, just not the tariffy kind that Trump talked about on the campaign trail. Of particular interest is repatriation. (See sidebar for previous story.)

User Fee Renewal Might Be Bumpier

Since the healthcare debate seems likely to go unresolved this Congress, the renewal of the FDA user fee programs, which must be completed by midsummer if the agency is going to avoid sending layoff notices to user fee funded staff, could threaten to become a flashpoint since it's a healthcare related bill that has to pass.

The Trump administration has signaled it wants to get a better deal from industry in the form of higher fees, and Sen. Richard Burr, R-N.C., has said that FDA should bring more to the table in terms of performance. (Also see "User Fees: Should US FDA Incur Penalties For Missed Deadlines?" - Pink Sheet, 26 Mar, 2017.)

Those are just the adjustments about the fees themselves; the user fee legislation might see amendments on everything from "right to try" to drug pricing. It's a tempting vehicle, but at the opening hearing March 21, Senate HELP Committee Chairman Lamar Alexander, Tenn., argued that "in order to get this done on time, any additional policies Senators may want to attach need to be broadly bipartisan, related to human medical products, and non-controversial to avoid slowing this package down."

To make that happen, the pharma industry is probably not going be able to sit on the sidelines for this one.