Medicare Expansion and Life Sciences

With an election coming up in the United States, several presidential candidates are making Medicare expansion a centerpiece of their campaigns. What does that mean for the life sciences industry?

The 2020 presidential election is right around the corner, and the world’s largest healthcare market could be on the cusp of a revolution. All the top candidates for the Democratic party nomination have come out in favor of a large-scale expansion of the government’s role in the industry, with most of them touting some variation of “Medicare for All” – a plan to essentially expand the existing health insurance program for Americans aged 65 and older to cover the entire populace.

As the rhetoric heats up going into next year, it’s time to consider what such a public health care expansion might mean for the life sciences industry. We’ll examine a few potential positive outcomes, some possible negative consequences.

A change for the better?

Early indications are that a greater government role in healthcare could make sure that more of the discoveries emerging from the labs of leading life sciences and pharma companies will reach patients.

At the moment, experimental therapies and treatments that might save a life 10 years in the future has little chance of being embraced by private insurers whose business model depends on annual renewals – simply put, it doesn’t make sense for an insurer to buy an expensive high-tech intervention that pays off years or even decades after its beneficiaries stop paying premiums.

There’s also the possibility that if health insurers are faced with a public-sector alternative, they may respond competitively with their own long-term insurance products, which could include separate policies for genetic treatments and other experimental treatments.

Potential pitfalls

The risk that Medicare expansion would pose to health insurers and hospitals has gotten the most attention, but there are increasing warnings that drug companies and device manufacturers could also be approaching uncharted waters. Analysts at Raymond James have noted that drug manufacturers would have to pare prices down considerably under a single-payer system, as the single payer (the US government) would have overwhelming negotiating power and could intervene if companies refused to pay the government’s desired rate.

According to Wells Fargo Equity Research Analyst David Marist, indebted pharmaceutical companies or firms with medicines that are heavily used by Medicare recipients and therefore subject to rebating may be the most exposed, while smaller generic companies or those with cash pay products should be better insulated from any changes. Device manufacturers will have their own issues to consider, as a single-payer or hybrid healthcare system could be especially damaging to medical technology companies by eroding existing structural incentives for surgical interventions.  

Some of the biggest names in life sciences trust Argos Multilingual to lead the way through complicated regulatory changes. To learn why, get in touch with us.

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