No One Drug Per Therapeutic Class for Congress

As many of you may recall, earlier this year I commented on a section of the new Obamacare law that directed Members of Congress and their staffs to participate in the new healthcare program, effective January 1, 2014.  The theory was that if Congress mandated Obamacare for all Americans, then Members of Congress and their staffs were also going to enjoy the benefits of the measure.  However, as I pointed out in that earlier article, Congress apparently disagreed with this concept, as its Members were doing everything possible to avoid being included in Obamacare.

So, fast forward to this past Friday, August 2^nd. While you were enjoying a lazy summer day, Congress succeeded in its goal.  They are out of Obamacare.  President Obama, acting as Congress’ personal HR rep, directed the Office of Personnel Management to create a special “exception” to the law for Members and their staffs.

And what exactly did OPM propose?  As formally released just this morning, it generated a scheme which offers a substantial waiver to Members and their staffs that will provide grants of between $5,000 and $11,000 (based on individuals-only or family utilization) to “supplement” Obamacare “exchange” health policies.  The idea is that the basic Obamacare offering, which is expected to provide “bare bones” medical coverage, will need to be enhanced with additional premiums to purchase higher levels of care.  The goal: Achieve a level of care that is comparable to that currently offered under the Federal Health Benefit Program, which now provides coverage to Members and their staffs.  The FHBP, by the way, is a robust, highly valued benefit that is extremely well regarded by Members of Congress, as well as the entire federal bureaucracy.

One quick question: How will these new Congressional “supplements” be paid for?  The U.S. Treasury.  That is, you and I as taxpayers will pay for these new Congressional “grants.”

So, as a pharmaceutical executive, what should you make of these Obamacare “exceptions”?  Here are a few key questions you may want to consider:

Given what we now know about the program, do you think the estimated 30-40 million new Obamacare patients will be subjected to highly restrictive drug formularies?  Yes, very likely. The Essential Health Benefit that will be the basis for all  Obamacare health plans, has determined that conceptually, only one drug per therapeutic class, or perhaps a few more per class depending on your home state’s “benchmark plan,” will determine the drug formularies that you will sell into under Obamacare.  These clearly will not be robust Rx offerings and likely not good for your brand name sales.

On the other hand, do you think the 11,000 Members of Congress and their staffs, who now will have their Obamacare “supplemented” will face the same drug restrictions?  Very likely not.  If you take a casual look at the current FHBP plans the Members of Congress now enjoy, you will note that multiple generics are covered with $5 to $15 copays and that “preferred” brand name drugs in say, the high end Federal Blue Cross/Blue Shield program, are covered with a required $40 copay.  Overall, these are much richer offerings versus those that the Obamacare formularies are expected to provide.

So with these new OPM grants offered up today, Congress will continue to receive a high level of drug care.  The result?  None of this “one drug per therapeutic class” stuff for the Members of Congress or their staffs.  And I guess that is good news for you?

The Broader Point:  Using the Obamacare limited “one drug per therapeutic class” drug formulary concept as an example of the type of the general healthcare service that is anticipated under the new law, is there any wonder that Members of Congress and their staffs resisted accepting Obamacare?  Of course not.

The Members are not fools.  They know exactly what’s coming under Obamacare - and they really want no part of it.  And so the Members of Congress did what they have done so many times before. They exempted themselves from a law that they passed, but didn’t like, and left the rest of us to deal with Obamacare, “one drug per therapeutic class” formularies, and all the rest.

And to that point, how will your real-world of Rx customers manage Obamacare?   Will they be getting “exceptions” from the President for their Rx drug & general health care coverage under the Obamacare mandates?  No, they certainly will not.  In fact, we now have one report that estimates that in order to avoid the requirements and substantial extra costs mandated by Obamacare one half of all small business owners in America are planning to either cut back on the hours of their current employees, or directly reduce the number of workers the employ.  We also have several reports of major corporations paring their benefits, including formularies, to avoid the “Cadillac health plan” tax.  None of this can be good for the brand name prescription drug business.

But that’s the difference between the way Congress manages what it doesn’t like, versus the way the real world deals with issues it finds untenable.   Whereas Congress simply makes those situations that it finds unpalatable  go away, the rest of us, including the Rx industry, must live with the new reality and make painful adjustments in order to survive the actions of Congress.

And this brings us to this whole question of “exception medicine” that the Administration appears to be practicing under Obamacare.  Is this the type of “quality of care” decision making that we can anticipate going forward?  Are we looking at a future in which any time Members of Congress feel the pinch of some aspect of Obamacare, either from constituents or personal discomfort, that the House and the Senate will rise up in righteous self-interest and lobby the President to create an “exception”?

Well, it is starting to look that way.  Consider the following:

First we had the Medicare Advantage situation, a program that has more than 25% of the nation’s Medicare patients currently enrolled.  However, the 2010 Obamacare law mandated that by 2015 MA was supposed to be pretty much shut down.  But that’s not what’s happened.  Instead, HHS created an “exception”, with strong Congressional concurrence, that “changed” the shutdown mandate.  In fact, the previously doomed MA program has actually experienced an increase in HHS funding for 2013.  Why the “exception”?  Because it’s hugely popular among seniors, and Congress knows it.

And then we have the one year business “exception” which came after months of threats made by big and small business managers who promised employee workplace chaos if the new law were enacted in 2014.  Seeing the light, and being pressured by Congress, HHS declared that employers (but not individuals) did not have to honor the mandates of Obamacare until 2015.

And now, we have the OPM “exception” - which came after three months of pummeling of the OPM by Congress - that conveniently excuses Congress and its staff from the mandates of Obamacare, via the U.S. Treasury “supplements.”

You may be asking, are these “exceptions” by the Administration unusual?  Actually, no.  All total, more than 1,200 “exceptions” to Obamacare mandates have been granted by HHS to unions and companies since the law passed in 2010. And, interestingly, because each previous announcement tended to set off a political firestorm, the Administration quietly decided to stop publicly announcing these actions last year, even though it’s clear that the HHS “exceptions” have continued to granted.

However, in this case of the Obamacare “exception” for Members of Congress and their staffs, there’s no hiding this action from the public.  I anticipate that Congress and the President will be hearing a lot more from the voters about this situation next winter as the “one drug per therapeutic class” formularies - and all the rest of Obamacare - come on line for millions of patients.

Tom Norton is principal at NHD Smart Communications. He can be reached at tnorton@nhdcomm.com