Health policy changes to come slowly, Citibank policy analyst tells investors

NEW YORK Changes in the U.S. health care system are likely to be “slow and incremental” rather than dramatic and sweeping, despite the current mood of U.S. voters and the elevation of health care as a hot election-year issue, a health policy analyst told reporters and investors today in a conference call.

Speaking on the likely impact of the election on the retail pharmacy, pharmacy benefit management and pharmaceutical industries, Paul Heldman, a director and senior health policy analyst at Citi Investment Research, predicted that neither election-year politics nor pressure from voters, politicians and advocacy groups is likely to spur a sweeping overhaul of the U.S. health care system in 2009. Nor is that pressure likely to lead to a dramatic lowering of health care or drug costs or a system of universal coverage for all Americans in the near future, Heldman said.

Slowing the pace of change will be a divided Congress, whoever is elected president, and broad disagreement between Democrats and Republicans over how to fund a broader health coverage safety net, said Heldman.

The presumptive Democratic and Republican presidential nominees, Senators Barack Obama of Illinois and John McCain of Arizona, have widely differing views over the role of government in health care. “McCain’s policies are designed … to encourage growth of the individual insurance market, and to relieve employers of the cost burden of providing coverage,” said Heldman. “He would replace the tax preference of people getting their insurance through their employer with tax credits that can be used to help offset the cost of all individual and employer health insurance.

“Sen Obama’s model focuses more on government subsidies, raises money from employers, and really relies on people using those subsidies to get coverage if they don’t have it through their employer in the health insurance market,” Heldman added. “He would also raise taxes on wealthier Americans to help finance his plan.”

“Financing is a major issue,” said Heldman. “Obama wants to raise taxes on people making over $200,000 a year, and reduce taxes on people making less than that after the Bush tax cuts expire. That is a key part of Obama’s health expansion financing.”

McCain, on the other hand, “is on record supporting an extension of those tax cuts,” he added.

The result could be stalemate, said Heldman.

On the other hand, he said, both Obama and McCain support direct government negotiations with drug makers for lower prices for drugs purchased under the Medicare Part D drug benefit program. That could spur the chances next year for passage of a law allowing for direct drug-price negotiations, Heldman added. However, he said, “Government negotiating leverage with the pharmaceutical industry would require politicians to agree to deny seniors access to drugs if companies refuse to negotiate.”

For that reason, he said, “I think the government would use that authority sparingly at first. So the idea that either candidate is going to walk into the White House and flip a switch and [create] a widespread tamping-down of drug prices is very unlikely at this point.” 

Whichever candidate reaches the White House in 2009, the outcome of the election could be positive for the generic drug industry, according to the policy expert. Given the cost pressures on drug utilization, Heldman predicted the “continued and possible acceleration of generic drug usage trends under all candidates and outcomes.”

Both candidates favor greater reliance on lower-cost generics, he added. What’s more, said Heldman, “Both Senators McCain and Obama want a greater … investment in health information technology.” The result, he said, could be “a positive for pharmacy to the extent that through initiatives like e-prescribing, there’s greater generic drug substitution, a higher-margin business for them and for the PBM.”