Winners, Losers in Obama Health Proposal

By | February 22, 2010

Health insurers, makers of brand-name drugs and generic drugmakers are among the industry players who see further pressure in President Barack Obama’s health care proposal released Monday.

The White House plans to hold a summit with Democratic and Republican congressional leaders on Thursday to discuss Obama’s plan.

Following are some of the changes health care industries face in the Obama administration’s proposal, which was posted on the White House website at


Health Insurers

  • Insurers such as WellPoint Inc, UnitedHealth Group Inc and Aetna Inc overall face increased regulations and payment cuts.
  • Insurance plans would face a new federal Health Insurance Rate Authority to help U.S. states review “unreasonable rate increases and other unfair practices of insurance plans.”
  • Restrictions on companies that aim to protect consumers are expanded to add new protections, such as prohibiting all annual and lifetime limits, and ban pre-existing condition exclusions, among others.
  • Private Medicare plans called Medicare Advantage would see payment changes that aim to compromise between the U.S. House of Representatives and Senate bills. Reimbursement rates for the plans, which can offer more benefits than traditional fee-for-service Medicare coverage at a higher cost, would set benchmark payments at a certain percentage of traditional Medicare and then phase them out.
  • Medicare Advantage plans would also see payment adjustments for unjustified billing practices.
  • One small positive for health insurance companies: The 10-year $67 billion in fees they would face would be delayed until 2014.

Brand-Name Drugmakers

  • The brand-name pharmaceutical industry faces another $10 billion in fees over 10 years on top of its earlier agreement with the Senate Finance Committee to provide savings and rebates.
  • The industrywide fees, to be parceled out among companies such as Pfizer In and Merck & Co Inc, will be used to eliminate a gap in Medicare’s prescription drug coverage known as the “doughnut hole.” That could help brand-name companies by getting patients to continue taking their medication rather than switching to a generic or stopping medication altogether.
  • In a positive move for the companies, the fees will be delayed by one year until 2011.

Generic Drugmakers

  • Companies that make cheaper, generic versions of brand-name medicines would see an end to lucrative “pay-to-delay” settlements with brand-name drugmakers.
  • Obama’s measure gives the Federal Trade Commission authority to address the settlements and makes it illegal to pay generic manufacturers “to limit or forego research, development, marketing, manufacturing or sales of the generic drug.”
  • Exemptions would only be allowed if the companies can show their settlement would “outweigh the anti-competitive effects of the agreement.”


Device Makers

  • Medical device makers such as Boston Scientific and Medtronic Inc maintained their earlier win of reducing their costs to $20 billion, down from $40 billion, and won a two-year delay until 2013.
  • The industrywide fees were replaced with an excise tax that raises the same amount of revenue over 10 years.

Topics Drugs

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