Will Health Care Reform Become More of An Operational Burden than the DRA?

Preliminary results from an ongoing Model N industry survey of health care reform (HCR) impacts suggest it might with more than half of respondents saying it will -- at least in the short term.

While HCR has the potential to bring up to 30M new customers into the pharma market, it will do so in phases that won't end until around 2020. In the meantime, some of the operational issues start much sooner. Increased Medicaid rebates discounts and 340B-eligible facilities expansion start in the very near term and the market share fee on manufacturers' government business kicks in next year.

While the rebate increases in themselves do not pose a huge problem, especially for manufacturers with flexible automated rebates systems, they do represent an immediate margin cut that won't be made up in volume for a few years. In addition, manufacturers have to be careful about how this and 340B might affect their commercial business strategies and any business development plans they may have. These issues are why many manufacturers are lowering guidance, at least for the short term.

The market share fee is also problematic. It is not straightforward, with several layers of revenue threshold exemptions and rebates. And it is not like there is an enormous amount of industry transparency into government programs market share data. Determining how much cash to set aside to pay the fee is certain to add to a new wrinkle to revenue planning.

CBI and Model N are hosting a free webinar tomorrow featuring life science legal experts King & Spalding and manufacturer Hospira to examine some of these impacts. More info on the webinar can be found here.