The 26th Annual ROTH Conference kicked off on Sunday with a panel presentation exploring how the health care industry might be affected by the Affordable Care Act. While not a subject that’s been lacking in analysis, Sunday’s panel, “The Commercial Impact of the Affordable Care Act (ACA) on the Healthcare Industry,” still managed to dig deep into a complex issue and explore what new challenges and opportunities are being created by the rapidly changing industry landscape.
The panel was moderated by Michael Lerner, a partner with business law firm Lowenstein Sandler LLP, and the panelists included three distinct and important segments of the industry, with Gregory Simon, CEO of health care investment firm Poliwogg; Dr. Steven J. Mento, President and CEO of Conatus Pharmaceuticals (CNAT) ; and Paul Viviano, the CEO of the UC San Diego Health System. With representatives from the finance side, a public hospital system, and a small-cap biotech firm, the panel offered a diversity of perspectives on the issue.
Much of the discussion focused on the pending influx of new patients that is anticipated after so many people join the ranks of the insured as part of the grand bargain between the authors of the bill and the health care industry.
“The great trade, the great bargain that the provider industry made was, in exchange for coverage; because there were about 50 million people in the United States that didn’t have health insurance on December 31 and, a few weeks later, 32 million people more had access to health insurance; [they would control costs.]” said Paul Vivano. “At the highest level this trade of ‘everybody’s covered,’ albeit at a lower rate, really provided a lot of incentive to hospitals to work with this legislation.”
Dr. Mento gave the perspective for the pharmaceutical industry, saying that the direct impact on small companies in early stage development was probably minimal, given that many of the current issues will likely be resolved by the time their therapies hit the market. What’s more, the larger industry could be more than ready to deal with the changing face of the marketplace.
“I do think from the industry perspective, the larger pharmaceutical industry perspective, there were a lot of things the pharmaceutical industry wanted to be associated with the ACA that they got,” Dr. Mento said. “There isn’t a single payer system. I think that there’s a recognition that there’s going to have to be a tighter relationship from the value perspective on the medications that we develop. And there’s going to be a recognition that it’s likely to be a bit more difficult to develop next-generation products where the benefit is of more of a convenient than potentially a matter of medical benefit.”
In addressing the nature of the industry, with less flexibility in pricing and product offerings in many cases, Gregory Simon observed that government participation in the health care industry is nothing new for the sector.
“There’s no sector of the economy that wants price controls,” he said. “But if you think about pharmaceutical products, they already have price controls. There’s a price for Medicare. There’s a price for Medicaid. There’s a price for Canada set by the government. There’s a price for France set by the government. So the pharmaceutical and biotech industry already deals with price controls all over the world. … The problem from a patient perspective was if a company makes a drug to help people, you want as many people as possible to have access to a drug and that’s not the system that we had. The insured had access to the drugs at insured prices, but the poor had access to these drugs only at the full price because they weren’t insured. … So part of the concern was ‘we want to have our products reach the biggest market so that more people can have access to the benefits we spent years creating, but we don’t want the government setting any more prices than it already was setting.’”
In the end, the development of new systems for dealing with health care costs are coming at an important time, Simon observed. Creating a long term plan for sensible levels of health care spending should become even more important as a rapidly aging population starts to retire.
“You look at everybody in America who’s turned 65 since the Revolution, half of them are alive today,” Simon said. “Over the next 20 years, that number is going to quadruple. No one has ever lived in a society with that many people over the age of 65. How are we going to pay for it? We’re going to have to innovate. And we’re going to have to bring the tools that every other industry uses to financialize the future to hedge our costs.”
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