SCOTUS ACA Ruling: Status Quo for Pharma
For pharma and med tech, the SCOTUS decision today means pretty much the status quo will prevail. The fate of the ACA is now firmly back in the political arena and any major developments will depend on the outcome of November’s elections. The majority’s opinion – to the surprise of most court followers – chose a path to ruling the mandate constitutional that relied on Congress’ power to levy taxes rather than powers granted by the Commerce Clause. Either way, the result for the Life Sciences industry is the same: the ACA will proceed.
Outside of the mandate, the major issue decided was whether or not the Federal Government could coerce states – through the loss of all Medicaid co-funding - to accept the expansion of Medicaid via raised eligibility limits. Here, the majority ruled that this tactic was unconstitutional. Through 2016, this could be a moot point as the Feds are covering the full cost of the program expansion. However, given the variety of political and economic conditions that exist across the states, some states may opt to drop out by 2016 – a politically risky but not impossible scenario. The question here is what – if any – Federal mechanism would be created for these states to address this coverage “donut hole” (sorry, couldn’t resist). Additional subsidies for private market insurance perhaps. Could this affect pharma? Maybe. Given that commercial markets often pay a bit more for drugs than Medicaid, it could boost sales revenue but that may be offset by lower volumes. And with consistent medical loss ratios for insurance companies now enshrined across the country and outcome-based medicine gathering some steam, managed markets are likely to exert more pressure on pharma regarding drug prices and efficacy.
MDRP changes and 340B expansion are not affected at all here, since these are solely drug pricing and not insurance issues.
So, full steam ahead – for now.