Collateral Damage

Pharma Gets Roped Into the Trumpcare Maelstrom

Proposed changes to the Obamacare replacement plan could crush drug sales.

When you rush any kind of massive project, you raise the risk that people get hurt. 

That's certainly the case with health-care reform. As President Donald Trump and congressional Republicans scramble to save their troubled attempt to repeal and replace the Affordable Care Act, they are considering last-second changes -- including one that could add Big Pharma to the list of those damaged by the bill. This would further immiserate an industry already dogged by the president's repeated drug-pricing broadsides.

To win conservative support, the White House has reportedly offered to repeal the ACA's requirement that insurers cover a list of what it calls essential health benefits, including hospitalization, maternity -- and prescription drugs.


Changes to the Republican effort to repeal and replace the Affordable Care Act could negatively affect the biopharmaceutical industry

Source: Bloomberg

With this change, insurers would still offer such benefits, letting consumers choose which ones they want. But insurers would likely charge substantially more for them than for bare-bones plans, which would appeal mainly to young and healthy people.

Unless the GOP also repeals regulations compelling insurers to cover people with pre-existing conditions -- which seems politically unlikely -- then sicker people will gravitate toward the more-generous coverage, making it even more expensive and further stratifying the market.

Prescription-drug coverage could get caught on the wrong side of this divide, becoming ever more expensive and causing healthier people to skip it. 

And that is bad news for firms that make costly medicines -- firms that typically rely on the U.S. for the bulk of their sales.

On Edge

The structure of the U.S. prescription drug market is a major concern for drugmakers that largely depend on it

Source: Bloomberg

This could force the industry to reckon on a deeper level with the way it prices drugs.

So many medicines carry massive price tags because most patients typically pay just a small fraction of those list prices, while insurers handle the rest. That generous coverage is possible partly because everyone with insurance pays for it; healthy 27-year-olds help insure older diabetics.

If insurance coverage for drugs becomes more expensive and less common, then drugmakers will be hurt in two ways: Exposing more patients to high prices will crush demand, hurting sales. And the political pressure drugmakers already feel over prices will only intensify. The more Americans have to pay the actual list prices of drugs, the harder those prices will be to defend

Priced Out

Good luck affording AbbVie's Humira and other expensive drugs without insurance. Arthritis patients use the medicine every other week

Source: Bloomberg

The GOP's plan is still likely to fail. It was already a tough sell for many moderate Republicans, who fear the large coverage losses and Medicaid cuts that would result from the bill's passage. Taking away essential benefits could cost even more of those votes. Even if it manages to squeak by in the House, then it still seems likely to die in the Senate. But the bill's defeat is not guaranteed.

The health insurance status quo has been pretty good for pharma. Though the industry has been reluctant to criticize a president that has accused it of getting away with "murder" on pricing, it should make itself heard if this bill threatens drug coverage. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

    To contact the author of this story:
    Max Nisen in New York at

    To contact the editor responsible for this story:
    Mark Gongloff at

    Before it's here, it's on the Bloomberg Terminal.