Healthcare Reform Legislation Coming Into Focus

After months of behind the scenes negotiations, healthcare reform efforts in Washington DC are starting to come into focus. While legislation has yet to be formally introduced, the President and congressional leaders have been working with stakeholders since January.

While most legislators agree on the need for reform that increases access, maintains quality and lowers costs, how that goal should be accomplished and paid for remains very contentious. The most controversial proposals includes the creation of a public option that would allow individuals to buy into a government run healthcare plan, and include a pathway for approval of follow-on biologics. Both proposals could have potentially unintended consequences on California’s life sciences research and development.

While competition in healthcare is important, a government plan can harm life sciences companies and eliminate incentives for innovation. A government run healthcare plan that can unilaterally set prices for prescription drugs or use cost effectiveness research to restrict consumer choices will reduce incentives companies need to develop new treatments. A follow-on biologics pathway that does not include protections for patients, sufficient data exclusivity periods or strong protections for intellectual property will also harm innovation. BayBio has endorsed HR 1548 by Reps. Anna Eshoo (D-CA) Jay Inslee (D-WA) and Joe Barton (R-TX) believing it is the best policy available to protect patients and promote innovation.

The implications of healthcare reform are particularly concerning for small companies, many of which are dependant on pharmaceutical companies or still-frozen capital markets for research and development funding. Without such funding, small companies will be forced to stop research and shut down. These unintended consequences are driving life sciences industry concerns with healthcare reform discussions.

This week, Senator Kennedy (D-MA) the Chairman of the Health Education Labor and Pensions (HELP) Committee released a draft bill creating a universal healthcare system. The bill would mandate all individuals purchase insurance, require employers provide insurance to their employees or pay a fee to the government, and provide subsidies to help low income individuals purchase coverage. Much of the Kennedy plan is based on the healthcare plan passed by Massachusetts. Kennedy’s office cautions that the bill is “a draft of a draft” and that many changes are still possible and likely. At least 5 different Congressional committees are considering proposals and drafting legislation.

Democrats and liberals believe a public plan will effectively compete with private insurance plans, resulting in lower costs and better options for consumers. Republicans and conservatives strongly oppose a public plan, believing it will distort the marketplace and create a slippery slope towards a government-run healthcare system. Republicans in the Senate have recently stated that bipartisan reform is not possible if a government run insurance option is included in the legislation.

Also contentious are the proposals to finance healthcare reform. Reforms to the healthcare system that subsidize access to care will have cost impacts on the Federal government. The President’s 2010 budget contained proposals to pay for part of the cost, while leaving it up to Congress to develop proposals to pay for the rest. Several proposals have been floated over the last few months that include tax increases on tobacco and carbonated drinks. One proposal that has gained increased publicity is a plan to consider employer provided healthcare plans as taxable income. Employer contributions to employee healthcare plans are currently not considered taxable income.

Until recently, the President and his administration, wary about appearing high-handed in dealings with Congress have refrained from providing specific policy proposals. Instead the President has established basic principles and has largely left the details up to Congress. Last week, the President signaled a change in his strategy by sending a letter to Senators Kennedy and Baucus the Chairman of the Senate HELP and Finance Committees. In his letter, the President repeated his calls for reform and expressed support for a public insurance option. He also indicated openness to Congressional proposals that include shared responsibility policies such as mandating that all Americans purchase health insurance.

In public and in private, Congressional Democrats have laid out an ambitious timetable for achieving reform. House leaders have set a goal of passing a healthcare reform bill by July 31st, before Congress adjourns for summer recess. Senate Democrats are working through the Finance and HELP Committees. The Health Committee will be marking up its bill on June 16th while the Senate Finance Committee plans to have a bill on the Senate floor by the end of July.

All of this activity is no guarantee that healthcare reform will occur. Healthcare reform efforts in Congress in 1993 and in the state legislature in 2007 garnered similar momentum only to fall short. As healthcare reforms discussions continue in Congress BayBio will be working with Congressional leaders to ensure innovation is preserved in the process.

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For more information on public policy, contact Christopher Draper at cdraper@baybio.org