PPACA: What’s Next For Life Sciences Companies

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Law360, New York (August 24, 2012, 12:57 PM ET) -- Life sciences companies breathed a sigh of relief when the U.S. Supreme Court largely upheld the Patient Protection and Affordable Care Act (PPACA). After all, the PPACA will add millions of Americans to the pool of health care consumers. But the Supreme Court also held that the federally subsidized Medicaid expansion is optional for the states; therefore, as recently confirmed by the U.S. Congressional Budget Office, fewer people will be added to the pool than originally projected. As a result, drug manufacturers might not receive the full benefit of the bargain they made with Congress — an estimated $80-110 billion in rebates and discounts, which was based on the assumption that 17 million new customers would be eligible for Medicaid under the PPACA. Some will gain and some will lose under the PPACA decision. What’s for sure is that there will be changes for life sciences companies. The pharmaceutical industry, in particular, is in the midst of patent expirations on major blockbuster drugs, resulting in a staggering loss of revenues estimated at $127 billion over the next 5 years. However, no life sciences company is immune to the increasing pricing pressure, rising regulatory approval hurdles and the ever-expanding maze of health care providers, payors and regulators. We highlight below the key provisions of the PPACA and how they affect pharmaceutical, biotech and medical device companies after the Supreme Court’s decision.

- The PPACA and Biosimilars

- The Medical Device Tax

- Sunshine Reporting

- Tech Assessment and Diffusion under PCORI and IPAB

- Customers and Patients

Conclusion

Life sciences companies have always had to pay attention to state and regional differences in commercializing their products. However, with the anticipated variations in Medicaid expansion and health exchange adoption, manufacturers must pay even greater attention to states as they contemplate the PPACA’s impact on their customer base. Further, cost control efforts and ACOs are on the horizon. Life sciences companies can thrive under the PPACA, provided they account for areas of uncertainty and focus on proving the value of their products to purchasers and patients.

--By Konstantin Linnik, Ph.D., and Maria Buckley, Nutter McClennen & Fish LLP, and Andrew McArdell, Harvard Law School. (Konstantin Linnik is a partner and Maria Buckley is of counsel in Nutter McClennen's Boston office. Andrew McArdell is a student at Harvard Law School.)

Re-published with permission of Portfolio Media, Inc.

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